Annual Report 2013

Annual Reportfor the year ended March 31, 2013

The Japan Steel Works, Ltd.

Printed in Japan 2013.11

2013

Network★
★ Head Office
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ProfileDomestic
Head Office
Gate City Ohsaki-West Tower, 11-1, Osaki
1-chome, Shinagawa-ku, Tokyo 141-0032
Phone: +81-3-5745-2001
Facsimile: +81-3-5745-2025

In 1907, the Japanese government launched ajoint venture for the purpose of domestic weapons
production in Muroran, Hokkaido – later to become amajor steel manufacturing center – consisting of two
British firms (W.G. Armstrong and Vickers) and one
Japanese company. That was the birth of the Japan
Steel Works, Ltd. (JSW)
After World War II, the company turned its sophisticated technologies and considerable experience tomeeting peacetime needs. Continuing to produce
high-quality steel, it developed machinery making useof this steel and endeavored to open up new businessfields. In addition to heavy and chemical industries
such as electric power, steel, shipbuilding, andpetrochemicals, the company broadened into areasfrom automobiles to electrical machinery and information equipment, earning a worldwide reputation as anintegrated producer of steel materials and machinery.
Today, having grown into a comprehensive materials provider and manufacturer of mechatronics products, JSW is meeting society’s needs at the forefront.
In the steel and energy products business, we areserving the needs of the energy industry in areas suchas electrical power generation, oil refining, natural gas,
and wind power generation. In the industrial machinery
products business, we supply equipment for manufacturing and processing plastic materials, along witha diverse range of products in areas from information
technology to defense.

Osaka Office
Shinanobashi Mitsui Bldg., 11-7,
Utsubohonmachi 1-chome, Nishi-ku,
Osaka-shi, Osaka 550-0004
Phone: +81-6-6446-2480
Facsimile: +81-6-6446-2488
Fukuoka Office23-2, Sakuragaoka 1-chome, Kasuga-shi,
Fukuoka 816-0872
Phone: +81-92-582-8111
Facsimile: +81-92-582-8124

Contents
1
Financial Highlights (Consolidated)
2
Message from the President
5	Overview of and Progress Made in
the Medium-Term Management Plan
(JGP2014)
8
Our Business Domains
10
Review of Operations
13
Research and Development
14
Corporate Governance18
The Environment
20	Board of Directors, Corporate Auditorsand Executive Officers
21
Financial Section
22
Financial Performance (Consolidated)
46
Corporate Directory
47
Network

Forward looking statements
The performance forecasts included in thisreport are judgments based on the informationthat was available to the JSW Group at the time
this report was prepared and the actual results
may differ significantly from these forecasts
due to a variety of factors.

Nagoya Office
Mitsui Sumitomo Kaijo Nagoya Shirakawa
Bldg., 9-15, Sakae 2-chome, Naka-ku,
Nagoya-shi, Aichi 460-0008
Phone: +81-52-222-1271
Facsimile: +81-52-222-1275
Hiroshima Office6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602
Phone: +81-82-822-0991
Facsimile: +81-82-822-0997
Sapporo OfficeKitaichijo Mitsui Bldg., 2-9,
Nishi 5-chome, Kita-ichijo, Chuo-ku,
Sapporo-shi, Hokkaido 060-0001
Phone: +81-11-241-2271
Facsimile: +81-11-241-2275

Muroran Plant
4, Chatsumachi, Muroran-shi,
Hokkaido 051-8505
Phone: +81-143-22-0143
Facsimile: +81-143-24-3440
Hiroshima Plant
6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602
Phone: +81-82-822-3181
Facsimile: +81-82-285-2038
Yokohama Plant
2-1, Fukuura 2-chome, Kanazawa-ku,
Yokohama-shi, Kanagawa 236-0004
Phone: +81-45-781-1111
Facsimile: +81-45-787-7200

Overseas
JSW Machinery Trading (Shanghai)Co., Ltd.
28A, Strength Plaza, No.600-4,
Tianshan Road, Shanghai, 200051, China
Phone: +86-21-6192-1022
Facsimile: +86-21-6192-1023

JSW Plastics Machinery Vietnam Ltd.
Room 103, Techno-Center Thang Long
Industrial Park, Dong Anh District, Hanoi,
VietnamPhone: +84-4-3951-6383
Facsimile: +84-4-3951-6384

JSW Plastics Machinery, Inc.
555 South Promenade Ave., Unit 104
Corona, California 92879, U.S.A.
Phone: +1-951-898-0934
Facsimile: +1-951-898-1747

JSW Plastics Machinery (TAIWAN) Corp.
1F., No.21, Dahu 1st Rd., Gueishan Shiang,
Taoyuan, County 33373, Taiwan, R.O.C.
Phone: +886-3-396-2102
Facsimile: +886-3-396-2104

Detroit Office41135 Vincenti Court Novi, MI 48375,
U.S.A.
Phone: +1-248-536-0288
Facsimile: +1-248-536-5615

JSW Plastics Machinery (S) Pte. Ltd.
17 Gul Lane, Singapore 629413,
Republic of Singapore
Phone: +65-6861-4511
Facsimile: +65-6862-3166

Houston Office9801 Westheimer, Suite 220, Houston,
TX 77042, U.S.A.
Phone: +1-713-588-1303
Facsimile: +1-713-588-1322

JSW Plastics Machinery (H.K.) Co., Ltd.
Room 907, Corporation Park, 11 On Lai
St., Shatin, N. T., Hong Kong
Phone: +852-2648-0720
Facsimile: +852-2686-8204

JSW Plastics Machinery (M) SDN. BHD.
D6-5-G Block D6, Pusat Perdagangan Dana, 1
Jalan PJU 1A/46, 47301 Petaling Jaya,
Selangor Darul Ehsan, Malaysia
Phone: +60-3-7842-6076
Facsimile: +60-3-7842-6078

Japan Steel Works Europe GmbHFriedrichstr. 19, 40217 Düsseldorf,
F.R.Germany
Phone: +49-211-3116660
Facsimile: +49-211-31166640
Japan Steel Works America, Inc.
New York Office (Head Office)122 East 42nd Street, Suite 3810,
New York, NY 10168, U.S.A.
Phone: +1-212-490-2630
Facsimile: +1-212-490-2575

Japan Steel Works India Private Limited
611, Time Tower, MG Road, Sector 28,
Gurgaon, Haryana, 122001, India
Phone: +91-124-469-4444
Facsimile: +91-124-469-4433

JSW Injection Machine Maintenance(Shenzhen) Co., Ltd.
1F, YiBen Electronic & Business Industrial Park,
No.1063 Chaguang Road, Xili Town,
Nanshan District, Shenzhen City,
Guangdong Province, 518055, China
Phone: +86-755-8602-0930
Facsimile: +86-755-8602-0934

JSW Plastics Machinery (T) Co., Ltd.
78/6 JST Building 4th Floor, Moo7,
Kingkaew Road, Rachatewa, Bangplee,
Samutprakarn 10540, Thailand
Phone: +66-2-738-5272
Facsimile: +66-2-738-5277

47

Financial Highlights (Consolidated)
The Japan Steel Works, Ltd. And consolidated Subsidiaries

Years ended March 31, 2013, 2012 and 2011

Thousands of
U.S. Dollars

Millions of Yen

2013

2012

2011

2013

Net sales..........................................................

¥220,653¥221,368¥212,929$2,346,124

Operating income............................................

16,68023,911

28,495

177,352

Net income.......................................................

8,281

12,591

16,532

88,049Total assets......................................................

303,970

325,653

339,263

3,232,004

Total net assets................................................

134,368

128,613120,820

1,428,687

For the year:

At year-end:¥ million
3,000¥44.54$0.24

750
Cash dividends applicable to the year............

10.00

10.00

60,000
12.00

0.11

2,389

16,532

17,52812,591
8,281

50.00

33.93
22.33

12.50

44.54

25.00

47.22

37.50

0

2005 2004 20092007 20102008 20112009 2012 20132009 2010 2011 2012 2013

50.00

44.54

47.22

37.50

43.19

1
33

1

Net Income pe

16,532

17,5281,1

16,034Net Income

Operating Inco

¥

¥

43.19

8,281

0

2009 2010 2011 2012 2013

Net Income per Share

12,591

5,000

XXX

0

689

0

868

746

0

16,532

1,130

93,84899,363

10,00017,52815,00016,03412,00016,034Net Income

220,653

221,368

212,9292,239

2011
2013 2012 20132009 20122010 2011¥ million
20,000

8,000

0

0

¥ million
16,0002010 2008
20112009
2005 2006 2007
20092012
2010 20132011 2012 2013

15,000201,680
2,407

5,000

4,000

12,00015,00060,00060,000¥ million
20,000¥ million
20,000750

750¥ million
16,0002009 2010 2011 2012 2013

10,000Net Income

Net Sales

120,000

Operating Income

1,500

220,653

100,0000

2013

120,000

2010

221,368

180,000

2012

1,500

2013

212,929
2,239

2,250

201,680
2,407

150,000

144,461
227,113
2,349
124,118¥ million
240,000

2,402 119,347¥ million
3,000

Sales

Operating Income¥ million
200,000

227,1132,349

180,000

002006 2007 20082010 2009201120102012

0

2,250

2,402

0

¥ million
240,000

Net Sales

Sales

750

2011

¥ million
3,000

2,239

XXX

26.8

15

2,389

35.8

1,500

2,354

2,250

2,412 35.5

45

46.6

¥ million
3,000

Orders Received

Sales¥ billion
60

3

2,354

2010

2006 2007 2008 2009 2010

50,000120,000

Note: Amounts in U.S. dollars are presented solely for convenience and based on the rate of ¥94.05 = US$1.00,
0
the rate of exchange on March 29, 2013.

0

30

2,412

XXX

45.5

15

220,653¥33.93

221,368¥22.33212,929

Net income.......................................................

Amounts per share (yen and U.S. dollars):1,500

180,000

35.3%

201,680

39.2%

Equity ratio.......................................................

14.4%

227,113

43.8%

2,250

2,239

10.2%

44.4

42.9

30

¥ million
240,000

6.3%

ROE..................................................................
45

Net Sales

Orders Received

Ratios:38.5

Orders Received¥ billion
60

Message from the President

We will steadily implement
the measures described in our
medium-term management
plan (JGP2014) and work torecover orders.

Ikuo Sato
Representative Director & President

Overview of FY2012■ Business performance
Our business environment in the fiscal period under review reflected the uncertain
conditions in the global economy as a whole, which was affected by the sluggish
performance of the European economy due to the austerity measures implemented
by various European governments to try and address their debt crisis and also by theslowdown in economic growth in emerging countries such as China and India.
Meanwhile, conditions in the Japanese economy continued to be extremely severe asa result of the slowdown in the global economy and the ongoing appreciation of the yen.
However, supported by expectations for the economic policies of the new government thatwas inaugurated at the end of 2012, toward the end of the term a correction of the strong
yen and an upward trend in share prices were seen.
	Amid these conditions, at the JSW Group we have drawn up a medium-term
management plan, under the name of JGP2014, covering three-year period from April 2012
to March 2015. Our twin goals under this plan are to become “the No.1 global monozukuri(manufacturing) corporate group” and “a corporate group with a stable earnings structureand strong financial position.” To achieve these goals, we are implementing as our basic
management policy the following business activities; “1. Grow our products into the global
market leaders,” “2. Expand business operations into growth markets and growth fields,”

2“3. Create global network of monozukuri alliances,” and “4. Strengthen business base.” Inparticular, despite having to battle against the impact of the strong yen and the slowdown
in the global economy, in our Industrial Machinery Products Business we have focused
our energies into further differentiating our technologies from those of our competitors
and into providing products with even more value added and as a result, we were able toachieve our highest ever operating income by segment.
	On the other hand, an assumption in our medium-term management plan for our
Steel and Energy Products Business was that demand for our mainstay electric-power andnuclear-power products would bottom out and then start to recover in the second half ofthe fiscal year. However, various governments around the world decided to review theirelectric-power and nuclear-power policies, which delayed this recovery process and as aresult, the point that demand will bottom out and start to recover has been significantly
postponed. To compensate for this development, we concentrated our energies into
technological proposals for clad steel plates and pipes, cost reductions, and into increasingorders for our existing products. Nevertheless, these efforts were not enough to offset theextremely tough operating conditions in this segment and it recorded an operating loss bysegment.
While Industrial Machinery Products Business achieved growth in both sales andincome, these gains were cancelled out by the declines in the Steel and Energy Products
Business and as a result, overall sales were practically unchanged and income decreased.
Similarly, Industrial Machinery Products Business recorded an increase in orders received,
but this was not enough to compensate for the large decline in orders received in the Steeland Energy Products Business, and taken as a whole orders received decreased.
	As a result of the above, in FY2012 the JSW Group recorded net sales of ¥220,653
million yen (US$2,346 million, down 0.3% year on year), operating income of ¥16,680
million (US$177 million, down 30.2%), ordinary income of ¥17,108 million (US$181
million, down 26.8%), and net income of ¥8,281 million (US$88 million, down 34.2%).
■ Providing a year-end dividend of ¥5
We place great importance on providing our shareholders with stable and sustained
dividend payments and follow a basic policy of paying and increasing dividends based on
earnings in the corresponding fiscal period. We also remain committed to bolstering ourinternal reserves in order to fund the capital expenditure on productivity improvement
and technological development required to ensure our long-term and stable business
operations, as well as to strengthen our financial position.
	Based on these considerations, we have decided to pay an annual dividend of ¥10 per
share for the fiscal year under review and as the interim dividend was ¥5, the year-end
dividend was ¥5.
For the next fiscal period, we forecast a full year dividend payment of ¥5, to be paid as
an interim dividend of ¥2.5 and a year-end dividend of ¥2.5.

3

Message from the President
Forecasts for fiscal 2013
The global economy is expected to maintain its moderate recovery due to the monetaryeasing measures being implemented by various governments, but there remain many
problems yet to be dealt with, including the danger that the debt crisis in Europe will
reignite and concerns about an economic slowdown and stagnation in emerging countries.
Also, the Japanese economy is expected to gradually recover against the backdrop of the
improvements to the export environment thanks to the correction of the strong yen and theeffects of the Government’s economic and monetary policies, but we cannot ignore the riskthat this recovery will be derailed by a global economic downturn and the direction that
the Japanese economy is headed in remains unclear.
	In this kind of environment, sales and income forecasts for the JSW Group in fiscal
2013 are as follows. Following the decline in orders in fiscal 2012, we anticipate a decline
in sales and slumping operations in the Steel and Energy Products Business, while we also
expect that the changes made to the product mix in the Industrial Machinery Products
Business will have an effect on profitability; consequently, the overall forecasts reflect these
extremely tough conditions.
	Elsewhere, for our forecasts for orders in fiscal 2013, the slump in demand for electricpower and nuclear-power products, our mainstay products in our Steel and Energy
Products Business, is expected to bottom out and then start to recover in fiscal 2013. We
are also anticipating that our businesses, including the Industrial Machinery Products
Business, will benefit from the correction of the strong yen and the recovery of our relativecompetitiveness and by continuing to steadily implement the measures set out in our
medium-term management plan (JGP2014), we expect to recover orders.
June 2013

Ikuo Sato
Representative Director & President

4Overview of and Progress Made in theMedium-Term Management Plan (JGP2014)

Overview of the JGP2014 medium-term management plan
We aim to regain the growth path by building the Group’s products into the leading presence in the
global market, and to marshal the total strength of all JSW Group companies – including new businessalliances – to expand our business operations into new growth markets and business fields.

1. Our vision for JSW
The vision we describe in JGP2014 for the JSW Group of the future is of becoming the No.1 global monozukuri(manufacturing) corporate group. Specifically, we will provide our customers with the world’s best products
and become a group fully capable of competing in the global marketplace. In addition, our goal is to be a
corporate group with a stable earnings structure and strong financial position.

2. P
 rogress made up to FY2012
Net Sales
Steel and Energy Products BusinessIndustrial Machinery Products Business
Real Estate and Other Businesses

JGP2014(billions of yen)

250

212.9
200

221.3
2.4

97.6

150

228.0
2.4

2.0

134.0

113.9

220.6

2.2

225.0
200.0

240.0

250.0
2.0

2.0

2.0

2.6
128.0

138.0

110.0

110.0

FY2013

FY2014

123.0

130.1
123.8

100

112.9

50

105.0

92.0

88.2

FY2012FY2012

73.4

100.0

0

FY2010FY2011(Previous estimate)(Actual)

FY2013(Estimate)

FY2012

Targets under JPG2014

We anticipate a decline in sales in fiscal 2013 due to the impact of the sluggish orders in fiscal 2012, but we areaimingto recover from this andachieve an increase in sales in fiscal 2014.
Steel and Energy Products Business
Operating income
Industrial Machinery Products Business
Real Estate and Other Businesses
Adjustments

Net income

JGP2014(billions of yen)

30

28.4

0.7
25

0.7

3.2
0.1

23.9

27.0

5

97.6

150

134.0

113.9

128.0

138.0

110.0

110.0

FY2013

FY2014

123.0

130.1
123.8

100

112.9

50

105.0

92.0

88.2

FY2012FY2012

100.0

Overview of and Progress Made in the Medium-Term Management Plan (JGP2014)
73.4

0FY2010FY2011(Previous estimate)

FY2013(Actual)

FY2012(Estimate)

Targets under JPG2014

Operating Income and Net Income
Steel and Energy Products BusinessIndustrial Machinery Products Business
Real Estate and Other Businesses
Adjustments

Operating income
Net income

JGP2014(billions of yen)

30

28.4

0.7
25

27.0

0.7

3.2

23.9

0.1
0.7
20

16.2

0.7

16.5
15

11.5

0.6

16.0

0.8

12.5

25.0
10

16.6

16.7

15.4

0.7

15.2

1.0

8.5

12.2
0

0.8
-0.5

-0.8

-0.5

-0.4

-3.0

12.0
9.0

5.0

11.5

16.0

13.2

12.6

8.2

7.5
5

20.0

11.0
7.0
3.2
-1.3

-0.9

-0.9

FY2013

FY2014-1.7-5FY2010FY2011FY2012(Previous estimate)

FY2012(Actual)

FY2013(Estimate)

FY2012

Targets under JPG2014

We are currently working to secure orders in fiscal 2013 toward increasing income from fiscal 2014.

3. Measures to achieve an increase in both sales and income in FY2014
Basic management policy for JGP2014• Grow our products into the global market leaders• Expand business operations into growth markets and growth fields• Create global network of monozukuri alliances• Strengthen business base

Steel and Energy Products Business
1. Expand orders▷ Ascertain the point that the slumping demand in the electric power and nuclear power fields will change
direction▷ Strengthen product competitiveness (QCD)▷ Promote product development (in new fields and new materials)

6

2. Strengthen our corporate structure▷ Improve fixed costs· Optimize fixed assets (retire equipment)· Mobilize personnel (transfer personnel to the Industrial Machinery Products Business)

Industrial Machinery Products Business
1. Expand orders▷ Aim to develop globally by leveraging our strength as a comprehensive plastics machinery manufacturer▷ Strengthen product competitiveness (QCD)▷ Expand our business scope through receiving entire systems and full line-up orders
2. Increase productivity and production capacity· Improve productivity at plants, enhance collaboration within the JSW Group· Mobilize personnel (reinforce personnel by transfers from the Steel and Energy Products Business)
By steadily implementing the above-described measures, we expect to increase order volume.
Steel and Energy Products BusinessIndustrial Machinery Products Business
FY2013 order (Estimate)+¥9,700 million+¥15,400 million¥210,000 million

Also, as we are able to lower the break-even point, we expect to record an increase in both sales and income
in fiscal 2014.

7

Our Business Domains
JSW and the JSW Group carry out a wide range of business activities in a variety of fields. In the Steel and Energy
Products Business, these activities include the production and sale of steel castings and forgings, steel plates andstructures, as well as wind turbine system equipment. In the Industrial Machinery Products Business, these activities
include the production and sale of plastics machinery and other machinery. In addition, as part of our program of business diversification, we operate the Real Estate and Other Businesses.

Steel and Energy Products Business
Sales Composition

40%

8

Steel Products

Steel Plates and Structures

Wind Turbines

At the Muroran Plant, which manufactures steel in electric furnaces, we produce
a broad range of cast products and steel
ingots for forged products. In ingots forforgings, we have one of the world’s largest production capacities, of 650 tons. Ourrange of presses and hammers of various
types and sizes, including two 14,000-ton
hydraulic presses, ensures that we candeliver forgings in any needed shape. After
undergoing heat treatment, machining
and finishing, the cast and forged steel
products are used in the electric power generation industry (fossil fuel, hydroelectricand nuclear) as well as for steel-making,oil refinery and industrial machinery andfacilities. In addition to being a leading
global supplier of numerous extra-large
cast and forged steel products, our plant
produce a wide range of high-quality smalland medium-sized steel cast and forgedproducts.

At the Muroran Plant, which has one ofJapan’s largest 4-thick plate reversing rollingmills, we can roll high-quality, extremely
thick, wide, and long steel plates (maximum
thickness: 350 millimeters, maximum width:
4.8 meters, maximum length: 20 meters).
	Using advanced manufacturing technology we now mainly produce high-quality
clad steel plates and clad steel pipes using
clad steel plates. All of our products are used
in a wide range of industrial applications inJapan and overseas, giving this business aunique profile.
	In addition, the Muroran Plant integrates
the various forged steel products it manufactures and leverages the Company’s state-ofthe-art welding technologies and facilities to
produce very large welded structures, suchas pressure vessels for oil refineries and petrochemical plants, in an integrated processextending from raw materials to finishedproducts. As a result, we are meeting demandboth in Japan and overseas.

This sector deals with the entire wind turbine power generation system business,
designing its own towers, blades and equipment required by wind power generator
businesses. Among these businesses, higher
power generation efficiency and reliability as well as ease of maintenance havebeen achieved for power generators (J82)through the use of permanent magnet synchronous generators and the elimination of
step-up gears.

Business LinesBusiness LinesBusiness Lines

Production and sale of products for power
generation, steel-making, chemical machinery, nuclear power-related equipment, diematerials, and other areas

Production and sale of products for oil
refining, petrochemical, general chemical,
and power generation industries, as well asa wide range of pressure vessels, clad steel
plates, clad steel pipes, extra-thick steel
plates, and other areas

Production, sale and maintenance of windturbine system equipment

Industrial Machinery Products
Business
Sales Composition

Real Estate andOther Businesses
Sales Composition

1%
59%

Plastics Machinery

Other Machinery

Real Estate Management, etc.

At the Hiroshima Plant, we produce
injection molding machines, pelletizers, twin-screw extruders, and film andsheet manufacturing equipment. At the
Yokohama Plant, we produce blow molding
machines and spinning extruders.
	In injection molding machines, weoffer a lineup of electrically driven injection
molding machines, all of which feature both
improved productivity and energy-saving
standards along with enhanced basic performance and molding precision.
To respond to diversifying needs inthese product markets, we have establisheda Technology Development Center within
the Hiroshima Plant and engage in wideranging consultation with product users,
enabling us to put in place an integrated
development system to cope with changing
demand, from plastic manufacturing to processing machinery.

Supported by a proprietary technologies
and facilities at the Hiroshima, Yokohama
and Muroran plants, JSW produces industrial machinery for a wide range of demand,
including defense equipment, power plant
equipment, magnesium alloy injection
molding machines, aluminum die-castingmachines, laser annealing systems, rollingstock parts, and environmental facilities.

The real estate management businessfocuses on undertaking the stable management of rental buildings and utilizing idle
Group-owned assets. Our real estate business is divided into three areas: office buildings, housing and commercial buildings.

Business LinesBusiness LinesBusiness Lines

Production and sale of plastic injection
molding machines, plastic production andprocessing machinery (including pelletizers, compound extruders, film and sheet
manufacturing equipment, etc.) and blowmolding machines

Production, sale, and maintenance of
fluid machinery, hydraulic machines,
machinery for the production of electronic
components and displays (laser annealing
systems, etc.), magnesium alloy injection
molding machines, aluminum die-castingmachines, tightlock couplers and dampers,
and defense equipment

Rental of property, development/subdivision for sale, business support, and indirectfunctions services

9

Review of Operations

Steel and Energy Products Business
Steel Products Sector/Steel Plates and Structures Sector/
Wind Turbines Sector

Shell Flange Used for Pressure Chamber for
Nuclear Power Plant

J82 Wind Turbine System

Orders Received

58.6

61.7

Orders Received¥ million
140,000

Orders came to ¥61,390 million (US$652 million), a year-on-year

84,15961,39035,000121,016XXX

ment, orders
for products used in the electrical power generationindus70,000
30

78,06898,82970,00045.5

decrease of 21.4%. Despite an increase in wind turbine system equip-

118,858

105,000

115,69945

49.4

123,271

Orders Received¥ billion
Performancein fiscal 201260

¥ million
140,000

105,000

Clad Steel Platetry (including nuclear power) decreased primarily due to a delayed
35,000recovery 15in demand accompanying a slowdown in emerging
economies

as well as lagging advancements in electrical and nuclear power genera0

0

0

2010

2011

2012

2013

tion policies.2006
Sluggishdemand
2010
2011
2012
2007 20082009 2010for pressure vessels used in oil refineries

2013

also drove down orders.
¥ billion¥ million

Sales

Sales60came to ¥88,275 million (US$938 million), a140,000
year-on-year
130,138

113,959

77,35670,00097,66446.3

33.2

for oil refineries
and wind turbine system equipment.
30

	Operating loss amounted to ¥534 million (US$5 million), com29.3

88,27570,000105,000

power generation industry (including nuclear power), pressure vessels

105,001

112,915

45

XXX

57.0

decrease of 15.9%, due to lower sales of products for the electrical

121,921

105,000

Sales

Sales

¥ million
140,000

35,00015 operating income of ¥11,517 million in fiscal
pared with2011. Despite

35,000

implementing a range of measures to cut variable and fixed costs, we
0

0

0

2012

2013

were unable 2006
to counteract
the2010adverse effects of a number of factors,
2011
2010
2007 2008 2009

2012

2013

XXX

2011

13,2632010

including a lower capacity utilization rate due to the decrease in sales
Operating Income

15,429XXX

80,000

7,521

40,000

9,791

124,118

50,000

119,347

100,000

120,000

7,617

4,259

0

10

150,000
Company’s
profitability.

93,848

13,971

7,000

an intensification of export competition and deterioration in the

99,36314,000Operating Income

21,000XXX

25,185

Operating Income¥ million¥ million
and orders
caused160,000
200,000 received, and the yen’s high exchange rate, which¥ million
28,0002005 2006 2007 2008 200900

2005 2006 2007 2008 20092005 2006 2007 2008 2009

Industrial Machinery Products Business
Plastics Machinery Sector/Other Machinery Sector

Polyolefin Extruder/Pelletizer

Large-Size All-Electric Injection Molding
Machine (24600kN)

Magnesium Alloy Injection Molding Machine(280t)

Orders Received

Orders Received¥ million
3,000

Orders rose 1.8% year on year to ¥121,016 million (US$1,286 million).
2,250

2,239

2,354

2,412

XXX

45.5

44.4

38.5

manufacture
liquid crystal displays mainly for smartphones
and firm
1,500
30

2,389

45

This was due to a rise in orders of laser annealing equipment used to
42.9

121,016

118,858

70,000115,699

105,000

84,159Orders Received¥ billion
Performancein fiscal 201260

¥ million
140,000

orders for plastic injection molding machines. This result occurred in
750
spite of a15decline in orders for various types of plastic production
and35,000processing machinery, notably film-forming equipment.
0

0

0

2010

2011

2012

Sales increased
to 2010¥130,138 million (US$1,383 million).
2010
2011
2006 200714.2%
2008 2009

2013

2012

2013

This is attributable to robust sales of plastic production and processing¥ million

Sales

ment, and plastic injection molding machines.

35.5

35.8

million).30This is attributable to increased sales, thoroughcost-cutting
1,500

2,239

2,349

2,402

2,407

2,250

45

	Operating income increased 45.4% to ¥16,784 million (US$178
46.6

130,138

77,356

97,664113,959

105,000

70,000¥ billion

3,000
60 notably film-forming equipment, laser annealing
machinery,equip-

Sales

Sales

¥ million
140,000

XXX

26.8

measures, and to steps taken to enhance JSW’s lineup of high-value750
15
added products
born out of a level of technological expertisethat dif-

35,000ferentiates the Company from its rivals amid increasingly fierce price
0

2013

2012

2013

¥ million
16,00012,000

4,000

868

8,000

746

2005 2006 2007 2008 2009

2011

0

0

0

2010

1,130

124,118

93,848

7,521

50,000

119,347

100,000

144,461

150,000

Operating Income¥ million
200,000

99,363Operating Income

XXX

13,263

15,42980,0009,791

Operating Income

120,000

competition 2006
causedstrength of the yen.
2007 by
2008the2009prolonged
2010

XXX

2012

689

2011

¥ million
160,000

40,000002010

2005 2006 2007 2008 20092005 2004 2007 2008 200911

Review of Operations

Real Estate and Other Businesses
Real Estate Management, etc.

220,653

221,368

212,929

2009 2010 2011 2012 201316,532

15,00017,528Orders totaled ¥2,239 million (US$23
million), sales came to ¥2,239 million
16,034

220,653

221,368

212,929(US$23 million), and operating income
12,591

2,239
201,680

2,407
227,1132,349

Net Income¥ million
Performancein fiscal 2012
20,000180,000

10,000

50.00

44.54

37.50

47.22

33.93

12,591

10,000¥43.19

16,532

17,52815,0002009 2010 2011 2012 2013

25.00

22.33

8,281

XXX

689

746

Net Income per Share¥ million
20,000

868

8,000

0

2009
2012 201020132011 2012 201316,03412,000Net Income 1,130

2,239

2,407

144,461
2,349

119,347

124,118
2,402

99,363Operating Income¥ million
16,000

5,000

0

2011

2010

8,281

2013

million).

60,0000

2012

Capital Expenditures
93,84850,0002013¥ million
240,000750¥ million
3,000

1,500

2,402

XXX

26.8

Sales

Operating Income

100,0002012

amounted to ¥840 million (US$8

0

2,250

2011

120,000

1,500

2011
2006 2007 2008 20102009 2010

150,000

Net Sales

Sales

35.5

750

0

¥ million
200,000

2,250

1,500

15

JSW Apartment Building Development(Fuchu, Tokyo)
00¥ million
3,000

201,680

60,000227,113

750

2,239

2,389

2,354

2,412

2,250

46.6

30

Orders Received35.8

Sales

45

Net Sales

120,0002010¥ million
3,000

180,000

1,500

2006 2007 2008 2009 2010

¥ billion60¥ million
240,000

2,239

Business Office Development(Fuchu Intelligent Park)

0

2,389

15

2,250

2,354

XXX

45.5

44.4

42.9

30

¥ million
3,000

2,412

Orders Received

45

38.5

Orders Received¥ billion
60

Capital¥5,570 million (US$59 million), withthe majority spent on
5,000
750 expenditures for the reporting period totaled
12.50
4,000
installation, improvement and maintenance work on a variety of production facilities.

0

0
0
0
	Detailsof capital2012
expendituresby individual
businesssegment are as follows.
2013
2009 2010 2011 2012 2013

2010
2011
2005 2006 2007 2008 20092005 2004 2007 2008 200902009 2010 2011 2012 2013

	In the Steel and Energy Products Business, capital expenditures totaled ¥2,575 million (US$27 million). This

44.54

43.19

47.22

the Muroran Plant.

Net Income per Share

Operating Income¥ million
expenditureconsisted largely of investments in the¥ constructionof a special melting shop to replace aging ones at
50.00
16,00037.50
12,000the Industrial Machinery Products Business, capital	In
expenditures came to ¥2,860 million (US$30 million),

1,130

8,000

25.00

33.93

primarily as a result of investments in upgrading of machine processing facilities at the Hiroshima Plant.
868

22.33

XXX

689

746

	In the Real Estate and Other Businesses, capital expenditures consisted primarily of the upgrading of facilities
on realestate for rental purposes, totaling ¥73 million(US$0.7 million).
12.50
4,000

	Companywide capital expenditures unallocable to individual segments came to ¥60 million (US$0.6 million).
0

0

12

2005 2004 2007 2008 20092009 2010 2011 2012 2013

Research and Development

Muroran Research Laboratory

Hiroshima Research Laboratory

Research and development activities were almost entirely
funded by the Company (The Japan Steel Works, Ltd.)during fiscal 2012. Combined spending on research anddevelopment for the Steel and Energy Products Businessand the Industrial Machinery Products Business in fiscal
2012 amounted to ¥4,054 million (US$43 million).
	As a materials and mechatronics company, we strive
to develop new products and production techniques using
our own technology, while also actively promoting widespread technical alliances and joint development in aneffort to put new products and technologies into effect as
quickly as possible.
	In terms of the direction of research and development, our
Research and Development Headquarters continues to promote cooperation with individual business divisions in orderto: (1) improve the capabilities, performance and reliability of
our core products and (2) develop products in new businessfields based on our core and differentiated technologies.
	Our Research and Development Headquarters encompasses our headquarters (located at Head Office), theMuroran Research Laboratory (situated on the premises ofthe Muroran Plant), the Hiroshima Research Laboratory(located at the Hiroshima Plant), and the Research &Development Center (located at the Yokohama Plant).
Our basic research and development policy is as follows
1. We promote the development of new products and businesses by focusing on the technological fields of newenergy & energy savings, information & telecommunications, nanotechnology & materials, and new production
technologies, which are directly related to our current
business activities. In addition, we pursue increased
collaboration between the Research and Development
Headquarters and our business divisions. Accordingly,
we aim to develop our existing business by focusing on
expanding and upgrading our core technologies.
2. Promoting not only basic research aimed at future technologies and the needs of 21st century society but also
research on component technologies used in existingproducts, we will develop these into research and development projects that will translate into new products
and businesses in the future as well as into innovations
and new possibilities for existing products.
3. In product development for Steel Products, we are focusing on energy fields and on further expanding the number of our many No.1 products while commercializing
products in new fields. In Machinery Products, we are
aggressively promoting the expansion and upgrade of

Research & Development Center (Yokohama)industrial machinery, including plastics machinery andIT equipment. We will prioritize the investment of business resources in these types of machinery by defining
a framework for commercialization with an eye toward
mergers and acquisitions and the forging of alliances.

Overview of R&D activities by businesssegment▷▷▷ Steel and Energy Products BusinessIn terms of the development of steel products centered onmaterials, we have been carrying out materials development in such areas as clad steel pipes for natural gas transportation, large steel castings and forgings and high alloymaterials for high-efficiency thermal power generation,
forged steel products for next-generation nuclear power
plants, and high-performance nonferrous alloys, as well as
manufacturing process technology development. We havealso been pursuing technological development to create
more advanced materials and component technologies forexisting products. In the field of new energy, we have set
out to design wind turbine blades for use at wind power
generation plants, establish various reliability-related analytical technologies and develop more advanced component technologies for power generators.
For fiscal 2012, spending on steel and energy products’
research and development totaled ¥1,567 million (US$16
million).
▷▷▷ Industrial Machinery Products BusinessIn the field of machinery-related products, we have beendeveloping low-cost production technologies for high performance magnesium alloy injection molding machines,
the commercialization of aluminum die-casting devices,
tightlock couplers and dampers tailored to European specifications, high-precision molding technology for plastic
extruders and injection molding machines, and highly
functional micro-nano melt transcription molding processequipment. We have also been developing highly functional and higher performance compressors and equipment for making film, as well as systems for cutting-edge
laser annealing equipment used in the production of TFT(thin-film transistor) liquid crystal displays, and otherapplications for laser devices.
	Research and development expenses for the fiscal year
under review came to ¥2,486 million (US$26 million).

13

Corporate Governance
Basic Stance on Corporate Governance
At JSW, we believe we must earn the trust of all our stakeholders, including our shareholders, clients andemployees, not merely to raise our enterprise value, which comprises both the Company’s economic value
and its value to society in the broader sense, but to make possible our very existence.
We have, therefore, designed a set of management structures to ensure an effective system of corporate
governance, and strive to facilitate appropriate disclosure of corporate information so as to achieve the levelof management transparency demanded by investors today.

An Outline of Our Corporate
Governance System
The Company employs the traditional statutory auditor
system, comprising eight directors (one of whom is an
outside director) and four statutory auditors (hereafter,“corporate auditors”), of whom two are outside
auditors.
The term of office of directors is one year, and wehave adopted the corporate officer system andseparated the decision-making and oversight functions
from the executive functions performed by the
corporate officers. In this way, we have taken steps to
speed up management decision-making and enhance
the performance of both oversight and executivefunctions.
	In principle, the Board of Directors’ meeting isconvened once a month. At the meeting, decisions andreports are made on matters of importance to the
management of the Company, including basic
management policies and matters stipulated by legal
statute. Board of Directors’ meetings are also attended
by senior executive officers and those of higher rank,
and are positioned as an oversight body with respect tothe performance of their duties by the directors andcorporate officers.
	In addition, an Executive Board composed of four
representative directors and other directors designatedby the President meets once each week, with one
outside director and one corporate auditor also in
attendance (corporate auditor chosen by rotation), todiscuss and make decisions on matters of management
importance and other matters of importance to the

14

performance of their duties by the directors andcorporate officers, as well as to discuss, report, andmonitor matters relating to overall management of theCompany.
	In addition to these bodies, the Management
Council, consisting of directors, corporate auditors, theheads of operating divisions, plant general managers
and managers at corporate headquarters, and otherpersons with executive responsibility, convenes once amonth in principle. The Management Council analyzes
the business environment, monitors the progress ofbusiness plans, and ensures that knowledge is widely
shared among the Company’s management and isreflected in their decisions and that risk management
and compliance are rigorously observed.
The Board of Corporate Auditors consists of four
corporate auditors, of which two are outside corporate
auditors with one serving full-time. The Company’s
corporate auditors attend meetings of the Board of
Directors, the Executive Board, the Management
Council and other important meetings. They also pay
regular inspection visits to the Company’s plants andkey offices and to major Group subsidiaries once
during each half of the fiscal year, as a general rule.
Meanwhile, they receive important reports fromrespective divisions when needed and exchange views
with directors and key employees. Based on these
efforts, they express their views to management from an
objective and neutral point of view, and exercise strict
oversight with regard to the execution of Company
directors’ duties.

Our Internal Control
and Risk Management System
JSW regards it as a management issue of crucial
importance to have an effective internal control system
in place to ensure the correct performance of business
operations. We are, therefore, working to improve oursystem of internal control in line with our Basic Policy
on Internal Control Systems resolved at the meetings ofthe Board of Directors, in addition to the Regulations
Regarding the Promotion of Internal Control Activities(one of the Company’s internal regulations). In
addition, we will respond to social changes and work toachieve a more appropriate and efficient system byproperly reviewing internal control issues andresponses.
The points below delineate the fundamental
stance adopted by the management of JSW toward theissue of internal control, and highlight the progress wehave achieved thus far in strengthening the Company’s
internal control system.
1. Improving the internal control system
In addition to setting up a specialist unit dedicated tosupervising the Company’s internal control system,
the Internal Control Committee holds meetings onan ad hoc basis, as deemed necessary.
2. O bservance of legal regulations and theCompany’s Articles of Incorporation
JSW does not limit compliance to the prevention ofillegal acts and the observance of legal regulations
and the Company’s in-house rules, but instead views
compliance in the broader context of general social
responsibilities and upholds a wide variety of rules
and regulations. The key to success for complianceactivities lies in having directors and corporate
officers take the initiative in setting an example andpracticing truthfulness, while raising employee
awareness on compliance issues through educationand training.
JSW has established a department responsiblefor internal audits to ensure that the Company’s
overall operations observe all laws and regulations,as well as in-house rules. In addition to periodic

audits, this department conducts spot audits, as
deemed necessary. The results of these audits arereported to the president and relevant parties
including, as appropriate, the Board of Directors, theExecutive Board, the Management Council and the
Corporate Auditors.
We have also created a system comprisinginternal and external routes for reporting anddiscussing compliance violations when discovered,
which guarantees anonymity and protection from
reprisal.
The Company has clarified in its Corporate Codeof Conduct its policy of strict opposition to theactivities of criminal organizations or individuals
and it takes firm action to eliminate these anti-social
forces through the establishment of a single
dedicated office for the communication of relevant
information and the management ofcountermeasures.
3. Safeguarding and management of information
The Company appoints a director or corporate
officer to the task of ensuring the safeguarding andmanagement of information. In accordance withrules and regulations governing the management of
documents and information, the Company storesand manages important information related to the
execution of directors’ and corporate officers’ duties
including the minutes of important meetings andwritten requests for management decision approval(ringisho), and other important documents as written
documents or as electronic records held for
safekeeping.
Further, directors and corporate auditors are able
to access and view or copy this information asneeded.
The Company also discloses financial andimportant management information in a timely andappropriate manner.
4. Risk management
At JSW, directors, corporate officers and employees
who concurrently serve as the managers understandand evaluate the risks involved in carrying out theirduties in their divisions, and accordingly respond to15

Corporate Governancerisks within the scope of their authority as stipulated
by regulations and the system for management
decision approval (ringi system).
Moreover, key risk factors are discussed atmeetings of the Board of Directors or of the
Executive Board.
The Company has established regulations forrisk management and defined a Companywide risk
management system. With respect to risk based onfunctions such as safety and hygiene, environmental
management, information security, and security
export controls, the relevant division in charge of
those risks sets up committees or creates regulations
for managing each of those risks across divisionboundaries and then appropriately manages them.
Moreover, a director or corporate officer of theCompany has been placed in charge of risk
management, and is accordingly tasked with
monitoring such matters in collaboration with thedepartment responsible for internal audits andreporting to the Board of Directors or the Executive
Board.
	Risk managers are assigned within each divisionat the headquarters, within each business unit, andat each plant. These risk managers ascertain theappropriateness of existing measures and work to
identify everyday risks. In the case of critical risk
situations, a crisis management headquarters isestablished to provide the appropriate response. In
this way, we are addressing risks under both ordinaryand extraordinary circumstances.
5. Ensuring efficient performance of duties
To ensure rapid decision-making and the flexible
and efficient performance of management duties, thepresident has been made the chief executive officer,
and directors have been put in charge of theperformance of duties in key departments within
headquarters and business units. Under theirleadership and supervision, the corporate officers
appointed by the Board of Directors perform theduties delegated to them.
Moreover, the directors and corporate officers
discuss, decide and report important matters inmeetings of the Board of Directors and the Executive

16

Board.
	At JSW, Companywide goals applicable among
directors, corporate officers and employees andincorporated into the Company’s Medium-Term
Management Plan and business plans are establishedat Board of Directors’ meetings. Meanwhile, eachdirector and corporate officer develops concretemeasures for achieving these goals, while duties aresegregated in line with in-house regulations andspecific measures are planned and implemented.
Furthermore, directors and corporate officers
conduct reviews of the results and provide periodic
progress reports, as well as impromptu reports atmeetings of the Board of Directors, the Executive
Board and the Management Council.
6. Ensuring appropriate management conduct at
Group companies
The Company encourages its subsidiaries to follow
its Vision, Management Philosophy and Corporate
Code of Conduct, and also create their own systems
of internal controls. In addition, the Company
supports the autonomy of their management.
The Company has drafted regulations
concerning the operation and management of its
subsidiaries and has clarified the system ofmanagement responsibility and leadership for them.
Moreover, the Company is creating a system
whereby reports and notifications can be maderegarding subsidiaries’ decisions on important issues
and other matters of concern, and data can becollected. At the same time, the Company is careful
to ensure a certain amount of management
independence of its listed subsidiaries.
JSW dispatches its officers and employees as
directors and corporate auditors to Groupsubsidiaries. Also, to ensure our subsidiaries’ strict
adherence to all laws and regulations, as well as
in-house company regulations, we request that thesecompanies conduct in-house audits, either periodicor spot audits, through the departments in charge ofeach subsidiary, and also by a department responsible
for the internal auditing of subsidiaries. We also
directly audit operations and provide guidance for
improving internal controls of subsidiaries.

7. A
 ppointing staff to assist corporate auditors, andensuring the independence thereof
The Company appoints staff from among its
employees to assist the corporate auditors in theperformance of their duties, upon request. The
opinions and consent of the corporate auditors
themselves are sought with respect to theappointment and dismissal of the said staff and allother personnel-related measures such as
performance evaluation and compensation packages,
and no action is taken without the corporate auditors’agreement, so as to ensure the independence of thecorporate auditors’ assistants from the influence ofthe directors and corporate officers of the Company.
8. S ystem for submission of reports to the corporate
auditors by the directors and employees of theCompanyAt JSW, corporate auditors attend the Board of
Directors, the Executive Board, the Management
Council, and other managerial meetings whereimportant matters are discussed, decided andreported. Corporate auditors are guaranteed
opportunities to attend these meetings.
	In keeping with the ringi system, corporate
auditors are also shown the records of management
decision approval (ringisho) for their perusal.
Moreover, the corporate auditors may request reports
from directors, corporate officers or employees at any
time they deem necessary.
9. E nsuring effective performance of audits by the
corporate auditors
We provide an environment in which directors,
corporate officers and employees of the Company canrecognize the importance and benefits of audits
performed by corporate auditors, thereby enablingthem to give the highest priority to cooperating withcorporate auditors in their duties as far as possible.
The corporate auditors can request thecollaboration and cooperation of the Company’s
Internal Audit Division, other head office divisions,and all other divisions of the Company in theperformance of audits.
We provide an environment that enables

corporate auditors to enlist close collaboration withaccounting auditors and the Internal Audit Division.
We also provide an environment that allows
corporate auditors to employ the services of legal
advisors and other outside experts at their own
discretion.
10. System for ensuring the reliability of financial
reports
The Company follows basic internal control policies
for financial reports and evaluates the effectiveness ofinternal controls for financial reports. Such findings
are accordingly reported to the Board of Directors andthe Executive Board and discussed in their meetings.

Policy Regarding Large-Scale
Purchases of Company Shares
By resolution of the meeting of the JSW Board of
Directors held on September 10, 2007, the Company
instituted a set of rules to be obeyed and procedures tobe followed by any party seeking to purchase the sharesissued and outstanding of the Company. These rules
and procedures were adopted under the name of
Measures against Large-Scale Share Acquisitions(takeover defense measures). Subsequent to thisresolution, a partial amendment of these measures waspresented at the Company’s 82nd Regular General
Meeting of Shareholders held on June 27, 2008, and theagenda item was approved and updated. After that,necessary amendments were made and then approvedby shareholders at the Company’s 85th Regular General
Meeting of Shareholders held on June 24, 2011.

17

The Environment
Environmental Policy
JSW recognizes that as a responsible member of society it has an important duty to operate in harmony
with the environment. We also engage in business with the aim of contributing to ecologically sustainable
development of society through production activities that respect environmental integrity, and by developing environmental preservation technologies.
In recognition of the importance of activities in promoting environmental management, we obtained ISO14001
certification for the Muroran and Hiroshima Plants in 1998 and the Yokohama plant in 2006, and continue to takesteps toward maintaining more effective environmental controls. Furthermore, JSW Group companies Meiki Co.,
Ltd., YPK Co., Ltd. and Fine Crystal Precision (S.Z.) Co., Ltd. have also obtained ISO14001 certification.
Action plan
1. We aim to carry out environmental tasks in an
organized way, and to implement environmental
preservation activities continuously.
2. We will set appropriate objectives and targets for
reducing the burden our activities impose on theenvironment with conserving biodiversity.
3. We aim to provide society with products and services
that contribute to the preservation of the environment.
(1) We endeavor to increase the social value of our
products in terms of environmental protection,
safety and hygiene.
(2) We will provide products and services that reduce
environmental loads by obtaining a clear grasp ofenvironmental needs and developing technologies.
Common policy for business facilities
Taking into consideration respective business activities,
local communities and the surrounding environments,
each plant operates by setting out its own environmental
policy, objectives and targets drawing on methods
compliant with international standards. Toward suchends, JSW plants continually strive:
Environmental
Management Committee

President

Chief Environmental
Management Supervisor/
Environmental Management
Committee Chairman(Director in charge ofEnvironmental Management)

1. T
 o respect laws and regulations and agreements wehave concluded with external parties
2. T o prevent pollution and reduce and appropriately
treat waste, and to conserve the ecosystem
3. T
 o improve “resource productivity” through implementation of energy efficiency, resource efficiency,
and recycling
4. T
 o inform employees and other companies residing
within our facilities of our policies and require theircooperation
Environmental Management Structure
The Environmental Management Committee, headed by
the director in charge of environmental management,
determines matters such as annual environmental management policies and programs of environmental activities for the whole company. Each plant has its own
Environmental Supervisory Committee which promotes
environmental management activities and works handin hand with other Group companies including affiliates
to reduce the environmental impact of the company’s
activities.

Environmental
Supervisory Committees

JSW plants
Environmental Management
Plant Supervisors(Plant general managers)

JSW plants
Environmental Management
Supervisors

JSW Group companies
Environmental
Management Supervisors

JSW Group companies
Environmental
Management Supervisors(Company presidents)

Environmental
Supervisory Committees

18

Departments
Affiliatedcompanies
Departments
Affiliatedcompanies

Medium-Term Plan for Environmental Management Activities (Fiscal 2013–2017)
We have been actively engaging in environmental management initiatives on a companywide basis since drafting
our initial medium-term environmental action plan back in fiscal 2001.
With fiscal 2012 marking the final year of our Medium-Term Plan for Environmental Management Activities forfiscal 2009 to 2012, each of our plants pursued initiatives geared toward achieving targets of the plan.
With regard to the observance of laws and regulations, we implemented environmental patrols at environmental-related facilities, plants, and other sites in the vicinity, and confirmed that all environmental preservationrelated laws and regulations are being observed, and that the environmental management system is functioning
properly. To effectively communicate the results of the environmental patrols, we have been carrying out training
programs for employees, including those of our affiliates and collaborating companies.
In April 2013 we set out on environmental management initiatives under our fourth Medium-Term Plan forEnvironmental Management Activities. The newest plan, which covers fiscal 2013 to 2017, is geared toward
environmental activities for the entire JSW Group, and in particular encompasses Group operating bases outside
the realm of our plants in Muroran, Hiroshima and Yokohama. As with the previous medium-term environmental
plans, this plan also sets forth quantitative targets that we are working to achieve in terms of lower consumptionof energy and other resources, and in regard to recycling initiatives.

Environmental Preservation Activities
The following section introduces a number of initiatives from among JSW’s wide range of environmental preservation activities.
Safety and disaster prevention activities
At each of our plants, we comply with laws and regulations and also conduct
regular disaster prevention activities to ensure their preparedness in the eventof a future calamity. We have also formed fire brigades that are to be called
into action should fire, earthquake or other potential catastrophe strike, andare accordingly training these crews to minimize any adverse impact that might
emerge under such scenarios. Furthermore, to ensure that we are able to swiftly
and adequately minimize any risk of contamination in the event of a hazardous substance spill, we have set up
and documented response procedures and communication channels involving equipment, facilities and initiatives
geared toward conceivable environmental outcomes. We have also been pursuing ongoing education and training
in this regard to bolster our disaster-readiness and response capabilities.
	Each of our plants initiates periodic environmental patrols designed to verify the control status and surveillancedata relating to specific air- and water-related facilities, pretreatment facilities, oil-water separation tanks and othersuch facilities.
Community contributions
Our Hiroshima Plant has been holding biannual spring and autumn cleanup
campaigns since 2003 to help rid the vicinity around the facility and nearby
commuting routes of trash. Meanwhile, our Yokohama Plant also conducts acleanup campaign along the main streets in the vicinity of that facility in April
each year, as part of its contribution to the surrounding community. We arecommitted to ongoing involvement in these activities going forward.

19

Board of Directors, Corporate Auditors and Executive Officers(as of June 25, 2013)

Board of Directors and Corporate Auditors

Executive Officers

Representative Director & PresidentManaging Executive Officers

Ikuo Sato

Representative Director & Executive Vice President

Hiroshi Hamao
Nobuhisa Kobayashi

Yoshitomo Tanaka

Senior Executive Officers

Representative Director & Senior Managing
Executive Officers

Shin-ichi Ono
Hirohisa Matsuo
Kazuo Kitamura

Etsuo Murai
Takao Ishido

Executive Officers

Director, Managing Executive Officers

Hiroyuki Tokushige
Hiroo Akabane
Yoshinao Ishibashi
Hiroshi Fujimura
Kenji Watanabe
Yutaka Higashiizumi
Naotaka Miyauchi
Takashi Shibata
Makoto Shimizu
Katsutoshi Orita

Yutaka Mizutani
Akira Kadota
Nobuaki Shimizu

Director
Hiroo Suto (Outside)

Corporate Auditors
Hisao Iwashita
Seiichi Uehara
Mamoru Kawakami (Outside)
Akira Sato (Outside)

Organization

Corporate Planning Office
Personnel Dept.

General Meeting of Shareholders

Secretary Office
General Affairs Dept.
Finance & Accounting Dept.
Domestic Offices

Board of Directors

Business Administration Dept.
Overseas Offices

Research & Development
Headquarters
Executive Board

PresidentInternal
Auditors Office
Board of Corporate
Auditors

20

Muroran ResearchLaboratory
Hiroshima ResearchLaboratory
Research & Development
CenterLaser & Plasma System Office

Steel Business Division

Muroran Plant

Machinery Business Division

Hiroshima Plant

Ordnance Business Headquarters

Yokohama Plant

Financial Section
The Japan Steel Works, Ltd.

Six-Year SummaryYears ended March 31

Millions of Yen

Consolidated

2013

2012

2011

2010

2009

2008

Net sales ....................................
Net income .................................
Total assets ................................

¥220,653¥221,368¥212,929¥201,680¥227,113¥220,851

8,281

12,591

16,532

17,52816,034

17,484

303,970

325,653

339,263

322,986

296,909262,453

Total net assets ..........................

134,368

128,613120,820

111,149

90,12585,231

Amounts per share (yen):
Net income .............................

¥22.33¥33.93¥44.54¥47.22¥43.19¥47.10Non-Consolidated

2013

2012

2011

2010

2009

2008

Net sales ....................................
Net income .................................
Total assets ................................

¥184,312¥189,329¥179,325¥175,333¥196,030¥189,318

7,519

11,257

14,527

16,665

15,44915,878277,086

302,550

316,176

298,783

277,301

243,433

Total net assets ..........................

120,866

116,255

109,734

101,615

82,44977,958¥20.28¥30.33¥39.14¥44.90¥41.62¥42.77¥10.00¥10.00¥12.00¥12.00¥12.00¥12.00Millions of Yen

Amounts per share (yen):
Net income .............................
	Cash dividends applicable tothe year.................................

Contents
21 Six-Year Summary
22 Financial Performance (Consolidated)
24 Consolidated Balance Sheets
26 Consolidated Statements of Income
27 Consolidated Statements of Comprehensive Income
28 Consolidated Statements of Changes in Net Assets
29 Consolidated Statements of Cash Flows
30 Notes to Consolidated Financial Statements
45 Independent Auditor’s Report21Financial Performance (Consolidated)
Operating Results

Net Sales
Net sales decreased ¥714 million year on year, or 0.3%, to ¥220,653 million(US$2,346 million) in the reporting period. The decline was attributable to a downturn in the Steel and Energy Products Business.
Operating Income
Operating income declined ¥7,230 million, or 30.2%, to ¥16,680 million (US$177
million). The operating income margin stood at 7.6%, a 3.2 percentage-point decline
compared to the previous fiscal year.
Net Income

Sales by Region

31,50032,18536,633Operating Income

Net income decreased ¥4,310 million, or 34.2%, to ¥8,281 million (US$88 million).
millionThis equates to net income of ¥22.33 for the period on a ¥per-sharebasis.
42,00010,500Cash Flows

16,68023,911

28,495The Japanese market accounted for sales of ¥105,180 million (US$1,118 million),
the Chinese market for ¥27,131 million (US$288 million),with all other markets
21,000accounting for ¥88,341 million (US$939 million).

42

16,68023,91175,000Net cash provided
by operating activities amounted to ¥23,735
million(US$252 mil- 28
21,00036,000lion), compared with ¥32,507 million in the previous term. This was due mainly to
net income before
income taxes and other adjustments of37,500¥14,80218,000
million and other 14
10,500non-cash items such as depreciation and amortization.
0

0% of total sales02009 20122010 20132011 2012 20132009 2010 2011

134,368

35,00023,735

11,500128,61370,000120,8200

23,00032,507111,149

0

105,000

90,12521,774

14

34,50026,31918,00053,24228¥ million
140,000

45,66863,60742¥ million
46,000Net Assets%
56

Net Cash Provided by Operating Activities

52.3
65,685
115,472

53,388113,858

36,00049.8
58,440110,21154,00002009 2010 2011 2012 2013

53.5

46.6

93,90337,5000¥ million
72,00052.8

119,853

Interest-Bearing Debt

Overseas Sales

10,500112,500

75,00016,68023,911

21,00028,49532,18536,633Operating Income

31,500¥ million
150,000

002009 2010 20092011 20102012 20112013 2012 20132009 2010 2011 2012 2013

¥ million
42,00053,24263,607

115,472
65,68593,903

113,858
53,38854,000110,21158,440112,500

119,853

28,49532,185

Cash Flow from Operating Activities

Interest-Bearing Debt

Overseas Sales

31,50036,633Operating Income

Cash and cash equivalents stood at ¥50,972 million (US$5410 million) at the report2010 2011 2012 2013
ing term-end, up ¥2,865 million year on year after adjusting for 2009non-cashitems.
This was partially the result of a decline in capital expenditures and working capital,¥ million%¥ million¥ million
despite net income
before income taxes and other adjustments
decreasingto ¥14,802 56
150,000
53.5
42,00072,000
52.8
52.3
49.8
million, in comparison to ¥20,302 million the previous fiscal year. 46.6

02009 2010 20092011 20102012 20112013 2012 2013

% of total sales

Equity Ratio

134,368

128,613105,000

120,820

115,

110

113,

34,500¥ million
140,000

111,1
3

42

¥ million
46,00045,668112,500

49.8

%
56

Net Assets

46.6

52.3

Net Cash Provid

53.5

52.8

119,85

Overseas Sale

22

¥ million
150,000

%
50.0

37.5

43.8
39.2

Cash Flow from Investing Activities

53,24263,60765,68523,911

28,49536,00058,44054,00053,38832,18521,000Interest-Bearing Debt

31,500Cash Flow from Financing Activities

Net Assets

134,368

128,61363,60753,242%¥ million
24.0
140,000

28

12.0
70,00014

6.0
35,000

0

2012

0

2013

0

17.5

14.4

134,368

18.3

128,61318.0
105,000

120,820

2009 201020112009 2010 2011 2012 2013

43.8

39.2

2009 20102011 2012 20132009 2010 2011 2012 201390,125

0

0

42
39.2

0

34.0 35.3

12.5

34.0 35.3

111,149

115,47230.3

110,211

113,858

25.0

65,68543.8

37.5

120,820

49.8

%
56

ROE
Net Assets

46.6

52.3

30.3

58,44025.0
36,00053,388EquityInterest-Bearing
Ratio
Debt

134,368

128,61337.5
54,0000

53.5

111,149

90,12553,24263,60752.8

93,9030%50.0

119,853

112,500

37,5002009 2010 20112009 20122010 20132011 2012 20133

¥ million
150,000

Equity Ratio

Overseas Sales

0134,368

35,000%¥ million
50.0
72,00012.5
18,000075,00023,735

11,500128,61370,000111,149
32,50723,00090,12521,774

105,000

120,820

45,668034,50026,31914¥ million
140,000

Net Assets

28

Net Cash Provided by Operating Activities

42¥ million
46,000¥ million
140,000

2009 2010 20112009 20122010 20132011 2012 20132009 2010 2011 2012 2013

% of total sales

%
56

%
56

23,73516,680

00120,82035,00065,685
115,472

0

11,50010,500111,149
32,507 23,911

02009 2010 20112009 20122010 20132011 2012 2013

70,00023,00021,00058,440110,211

14

105,000

90,12528,49521,774

18,00034,50031,50032,18537,500052.3

45,66836,00053,24228

75,000¥ million
140,000

26,31942¥ million¥46,000
million42,00036,63363,60765,685
115,472

93,90353,388113,858

54,00049.8%
56

Net Assets

46.6

52.3

NetOperating
Cash Provided
Incomeby Operating Activities

53.5

58,440110,211

112,500¥ million

72,00052.8

119,853

Interest-Bearing Debt

Overseas Sales¥ million
150,000

53.5

53,388113,858

2009 2010 2011 2012 2013

93,903

0

119,853

10,500¥ million

72,00052.8

Total assets as of the end
49.8 of March 2013 stood at ¥303,970 million (US$3,232 mil46.6lion),
down¥21,683
million,or426.7%, from the previous
term-end. This was partially
112,500
105,000
54,000due to a decrease in current assets stemming from lower figures for work in processcoupledwith a decrease in property,
plant and equipment.
28
75,00070,00036,000Liabilities at the reporting term-end stood at ¥169,601 million (US$1,803 million),
down ¥27,438 million, or1413.9%, from the previous
term-end. This was largely
37,50035,00018,000attributable to a decrease in long-term debt. Interest-bearing debt stood at ¥53,242
million(US$566 million), down0 ¥10,364 million from0the previous fiscal year.
002009 20102011
20122009 2010 (US$1,428
2011 2012 2013
Net assets
at thetotaled ¥134,368 million
mil2009reporting2010 20132011 term-end
2012 2013% of total saleslion), up ¥5,755 million, or 4.5%, over the previous term-end.

16,68023,911

28,49521,000¥ million
150,000

Interest-Bearing Debt

Overseas Sales

31,50032,18536,633Operating Income¥ million
42,000Financial Position

16,680Net cash used in financing activities amounted to ¥15,259 million (US$162 million),compared with a net cash inflow of ¥6,846 million for the previous term. This was
10,50018,000due in a large part to ¥13,830 million in repayments for long-term borrowings mainlyin the form of syndicated loans and dividend payments amounting to ¥3,708 million,
002009 2010 offset
2011 201220132009 20102011 2012million.
2013
but was partiallyby proceedsfrom long-term borrowingsof ¥4,400

3

3

36,633Operating IncomeNet¥ million
cash used in investing activities amounted to ¥5,832¥ million million (US$62 million),
42,00072,000compared with ¥18,601 million for the previous term. This was due mainly to an
investment of ¥6,209 million in property, plant and equipment.

10.2
6.3

2009
2011 20122012 201320132009 20102010 2011% of total sales

34,500

18.0

43.8
39.2

18.3

17.5

Equity Ratio%
24.0

45,668¥ million
46,000

ROE

37.5

Net Cash Provid

Equity Ratio

%
50.0

%
50.0

37.5

43.8
39.2

23

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheets
March 31, 2013 and 2012

Thousands of
U.S. Dollars (Note 3)

Millions of Yen

Assets

2013

2012

2013

¥ 51,005¥ 48,148$  542,318

690
51,288199(225)
59,516
6,473
5,076
174,024

2,062
44,495370(314)
79,3486,400
4,139
184,652

7,337
545,327
2,116(2,392)632,812
68,82553,9711,850,335

Less accumulated depreciation ...........................................................
			 Property, plant and equipment, net..............................................

11,05096,883140,932
6,382
737
255,986(161,510)
94,476

11,05896,954
144,515
8,042
2,088
262,659(156,117)
106,541

117,491
1,030,122
1,498,480
67,8587,836
2,721,808(1,717,278)
1,004,530

Intangible assets....................................................................................

789

934

8,389

Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates......................
Investment securities (Notes 16 and 17)...............................................
Long-term loans receivable..................................................................
Deferred tax assets (Note 20) ..............................................................
Other assets.........................................................................................
Less allowance for doubtful accounts ..................................................
			Total investments and other assets.........................................
			Total assets ..............................................................................

753
27,307
103
1,310
5,799
(594)
34,680¥303,970

868
25,434
241
1,932
5,471
(423)
33,524¥325,653

8,006
290,346
1,095
13,92961,659(6,316)
368,740$3,232,004

Current assets:
Cash on hand and in banks (Notes 14 and 16) ....................................
Notes and accounts receivable:
		 Unconsolidated subsidiaries and affiliates .......................................
		 Trade (Note 16) ...............................................................................
		Other ..............................................................................................
		 Less allowance for doubtful accounts .............................................
Inventories (Note 4) .............................................................................
Deferred tax assets (Note 20) ..............................................................
Other current assets ............................................................................
			Total current assets ....................................................................

Property, plant and equipment, at cost (Notes 5 and 6):
Land ...................................................................................................
Buildings and structures.......................................................................
Machinery and equipment ...................................................................
Leased assets .....................................................................................
Construction in progress .....................................................................

The accompanying notes are an integral part of these statements.

24

Thousands of
U.S. Dollars (Note 3)

Millions of Yen

Liabilities AND NET ASSETS

2013

2012

2013

¥ 12,703
11,404¥ 12,885
15,190$  135,066
121,25537
42,1791,498
21,3892,373
19,710111,29637
41,634
1,749
32,615
4,141
21,396
129,649393
448,474
15,928227,422
25,231
209,569
1,183,371

29,13435,532309,771

9,419
124
1,128
18,49758,305

9,695
195
1,084
20,881
67,389100,149
1,318
11,994
196,672
619,936

19,694
5,425
107,861

19,694
5,426
103,288

209,399
57,682
1,146,847(413)
132,568(408)
128,000(4,391)
1,409,548

Accumulated other comprehensive income:		 Unrealized holding gain (loss) on securities.......................................
		 Unrealized gain (loss) from hedging instruments...............................
		Translation adjustments...................................................................
			 Total accumulated other comprehensive income.........................

1,475
(332)
(474)
668

385
(62)
(650)
(327)

15,683(3,530)(5,040)7,103

Minority interests ..............................................................................
		Total net assets .............................................................................
			Total liabilities and net assets...................................................

1,131
134,368¥303,970

940
128,613¥325,653

12,026
1,428,687$3,232,004

Current liabilities:
Short-term borrowings (Notes 8 and 16) .............................................
Current portion of long-term debt (Notes 8 and 16) .............................
Notes and accounts payable:
		 Unconsolidated subsidiaries and affiliates .......................................
		 Trade (Note 16) ...............................................................................
		Other ..............................................................................................
Advances received for products ..........................................................
Accrued income taxes (Note 20) .........................................................
Other current liabilities..........................................................................
			Total current liabilities...................................................................
Long-term liabilities:
Long-term debt (Notes 8 and 16).........................................................
Accrued retirement benefits (Note 19)
		For employees.................................................................................
		 For directors and corporate auditors................................................
Deferred tax liabilities (Note 20) ...........................................................
Other long-term liabilities......................................................................
			Total long-term liabilities..............................................................
Net assets:
	Shareholders’ equity (Note 13)
Common stock:		 Authorized — 1,000,000,000 shares
		 Issued — 371,463,036 shares.........................................................
Capital surplus ....................................................................................
Retained earnings................................................................................
	Treasury stock, at cost (632,211 shares in 2013 and621,564 shares in 2012) ...................................................................
			Total shareholders’ equity ...........................................................

25

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Income
For the years ended March 31, 2013 and 2012

Millions of Yen

2013

2012

2013

Net sales.................................................................................................
Cost of sales (Note 9)..............................................................................
		Gross profit .....................................................................................
Selling, general and administrative expenses (Note 9) ........................
		Operating income............................................................................
Other income (expenses):
Interest and dividend income................................................................
Interest expense...................................................................................
Other, net (Note 10) ............................................................................

¥220,653
176,172
44,48027,79916,680¥221,368
169,733
51,63427,72323,911$2,346,124
1,873,174
472,940
295,577
177,352537(635)(1,780)(1,878)531(664)(3,476)(3,609)5,710(6,752)(18,926)(19,968)

Income before income taxes and minority interests............................
Income taxes (Note 20):
Current.................................................................................................
Deferred...............................................................................................
Income before minority interests...........................................................
Minority interests in net income of consolidated subsidiaries.............
Net income (Note 26)..............................................................................

14,802

20,302

157,384

6,049
272
8,479
198
¥  8,281

7,373
312
12,61625¥ 12,591

64,317
2,892
90,1542,105$   88,049

The accompanying notes are an integral part of these statements.

26

Thousands of
U.S. Dollars (Note 3)

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Comprehensive Income
For the years ended March 31, 2013 and 2012

Millions of Yen

Income before minority interests...........................................................
Other comprehensive income:Unrealized holding gain (loss) on securities...........................................
Unrealized gain (loss) from hedging instruments...................................
Translation adjustments.......................................................................
Total other comprehensive income (Note 12)........................................
Comprehensive income.........................................................................
Total comprehensive income attributable to:Shareholders of The Japan Steel Works, Ltd. ......................................
Minority interests..................................................................................

Thousands of
U.S. Dollars (Note 3)

2013

2012

2013

¥8,479¥12,616$ 90,154

1,089
(269)
185
1,004
¥9,484

(302)
(164)
(68)
(535)
¥12,081

11,579(2,860)
1,967
10,675$100,840¥9,277¥  206¥12,060¥    21$ 98,639$  2,190

The accompanying notes are an integral part of these statements.

27

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2013 and 2012

Thousands of
U.S. Dollars(Note 3)

Millions of Yen

2013

2013

Common stock:
Balance at beginning of year......

¥ 19,694 ¥ 19,694$  209,399

Balance at end of year...............

¥ 19,694 ¥ 19,694$  209,399

Capital surplus:
Balance at beginning of year......

¥  5,426 ¥  5,426

Disposal of treasury stock..........

(0)

(0)

(0)

$   57,693

Balance at end of year...............

¥  5,425 ¥  5,426$   57,682¥103,288 ¥ 94,779$1,098,224

Retained earnings:
Balance at beginning of year......
Cash dividends paid...................

(3,708)(4,082)(39,426)

Net income................................

8,281

12,591

88,049¥107,861 ¥103,288$1,146,847

Balance at end of year...............

Purchases of treasury stock.......
Disposal of treasury stock..........
Balance at end of year...............

¥   (408) ¥   (224) $    (4,338)
(5)
0

(184)
0

	Net changes in items other thanthose in shareholders’ equity....

¥128,000 ¥119,676$1,360,978(39,426)

Net income................................

8,281

12,591

88,049Purchases of treasury stock.......

(5)

(184)

(53)

Disposal of treasury stock..........

0

0

0

Balance at end of year...............

¥132,568 ¥128,000$1,409,548

1,089

(302)

¥  1,475 ¥    385

(2,860)(164)¥   (332) ¥    (62) $    (3,530)

Balance at end of year...............

¥   (650) ¥   (586) $    (6,911)
176

1,871

(64)

¥   (474) ¥   (650) $    (5,040)¥   (327) ¥    203995$    (3,477)
10,579(531)¥    668 ¥   (327) $    7,103

Minority interests:	Net changes in items other thanthose in shareholders’ equity....
Balance at end of year...............

¥    940 ¥    940191$    9,995

(0)

2,031

¥  1,131 ¥    940$   12,026¥128,613 ¥120,820$1,367,496

Total net assets:
Balance at beginning of year......
Cash dividends paid...................

(3,708)(4,082)(39,426)

Net income................................

8,281

12,591

88,049Purchases of treasury stock.......

(5)

(184)

(53)

$    4,094

Disposal of treasury stock..........

0

0

0

11,579

	Net changes in items other thanthose in shareholders’ equity....

1,187

(531)

12,621$   15,683

Balance at end of year...............

¥134,368 ¥128,613$1,428,687

Unrealized holding gain (loss) on
securities:¥    385 ¥    687

(269)$      (659)

Total accumulated othercomprehensive income:Balance at beginning of year......
(4,082)

Balance at end of year...............

Balance at beginning of year......

0(3,708)	Net changes in items other thanthose in shareholders’ equity....

Balance at end of year...............

¥    (62) ¥    102

Translation adjustments:

Balance at end of year...............

Cash dividends paid...................

Balance at beginning of year......

	Net changes in items other thanthose in shareholders’ equity....

	Net changes in items other thanthose in shareholders’ equity....

Total shareholders’ equity:
Balance at beginning of year......

Balance at beginning of year......

(53)¥   (413) ¥   (408) $    (4,391)

2013

2012

Unrealized gain (loss) fromhedging instruments:

Balance at beginning of year......

Treasury stock, at cost:
Balance at beginning of year......

Millions of Yen

2013

2012

Thousands of
U.S. Dollars(Note 3)

The accompanying notes are an integral part of these statements.

28

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
For the years ended March 31, 2013 and 2012

Millions of Yen

Operating activities
Income before income taxes and minority interests..............................
Depreciation and amortization..............................................................
Loss on impairment of fixed assets (Note 11)
Interest and dividend income................................................................
Interest expense...................................................................................
Equity in (earnings) losses of affiliates...................................................
Loss on write-downs of investment securities.......................................
Loss on disposal of tangible and intangible assets...............................
(Gain) loss on sales of property, plant and equipment...........................
Gain on negative goodwill....................................................................
Changes in operating assets and liabilities:
		 Trade assets (Note 16).....................................................................
		Trade liabilities.................................................................................
		 Inventories (Note 4)..........................................................................
		Other...............................................................................................
			Subtotal.......................................................................................
Interest and dividends received............................................................
Interest paid.........................................................................................
Income taxes paid ...............................................................................
			 Net cash provided by operating activities ...............................
Investing activities
Increase in tangible and intangible assets.............................................
Decrease in tangible and intangible assets...........................................
Purchases of investment securities.......................................................
Reimbursement of long-term deposits on contracts.............................
(Increase) decrease in short-term loans receivable................................
Collection of long-term loans receivable...............................................
Payments for investments in capital of subsidiaries and affiliates..........
Purchase of investments in subsidiaries...............................................
	Proceeds from purchase of investments in subsidiaries resulting inchange in scope of consolidation.......................................................
Other....................................................................................................
			 Net cash used in investing activities .......................................
Financing activities (Notes 8 and 16)
Net decrease in short-term borrowings................................................
Increase in long-term debt ..................................................................
Decrease in long-term debt .................................................................
Cash dividends paid.............................................................................
Acquisition of treasury stock.................................................................
Repayments of finance lease obligations..............................................
Other....................................................................................................
			 Net cash provided by (used in) financing activities.................
Effect of exchange rate changes on cash and cash equivalents........
(Decrease) increase in cash and cash equivalents...............................
Cash and cash equivalents at beginning of the year............................
Cash and cash equivalents at end of the year (Notes 14 and 16).........

Thousands of
U.S. Dollars (Note 3)

2013

2012

2013

¥14,802
15,990
446
(537)
635
(0)
13
1,927
(30)
(57)

¥20,302
19,244
—
(531)
664
0
2,303
379
(53)
—

$157,384
170,016
4,742(5,710)
6,752
(0)
138
20,489(319)(606)(16,333)(422)
19,840(4,614)
31,662539(643)(7,823)23,735(1,720)(3,332)
2,776
3,827
43,859526(667)(11,210)32,507(173,663)(4,487)
210,952(49,059)
336,651
5,731(6,837)(83,179)
252,366(6,209)
88
(10)
(201)
(68)
35
(107)
(12)

(17,233)
236
(682)
(739)
(205)
—
—
—

(66,018)936(106)(2,137)(723)
372(1,138)
(128)

500
153
(5,832)—
22(18,601)

5,316
1,627
(62,010)

(281)
4,400
(13,830)(3,708)(23)(1,814)(1)(15,259)
222
2,865
48,107¥50,972

(235)
—
(635)
(4,082)(2)(1,869)(21)(6,846)(69)
6,990
41,116¥48,107(2,988)46,784(147,049)(39,426)(245)(19,288)(11)(162,243)
2,360
30,463
511,505$541,967

The accompanying notes are an integral part of these statements.

29

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
1. Basis of Presentation
The Japan Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintain their books of account in conformity with the financial
accounting standards of Japan, and its foreign subsidiaries maintaintheir books of account in conformity with those of their respective
countries of domicile.
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally acceptedin Japan, which are different in certain respects as to the applicationand disclosure requirements of IFRS, and have been compiled from theconsolidated financial statements prepared by the Company as requiredby the Financial Instruments and Exchange Law of Japan.
As permitted by the Financial Instruments and Exchange Law ofJapan, amounts of less than one million yen have been omitted. As
a result, the totals shown in the accompanying consolidated financial
statements (both in yen and in U.S. dollars) do not necessarily agreewith the sums of the individual amounts.
Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year’s
presentation.
2. Summary of Significant Accounting Policies(a) Principles of consolidation and accounting for investments inunconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include theaccounts of the Company and any significant companies controlled
directly or indirectly by the Company.
Companies over which the Company exercises significant influencein terms of their operating and financial policies have been accounted
for by the equity method. All significant intercompany balances andtransactions have been eliminated in consolidation.
As of March 31, 2013, the numbers of consolidated subsidiaries,and subsidiaries and affiliates accounted for by the equity method were
35 and 1 (34 and 1 in 2012), respectively. Effective March 31, 2013,YPK Co., Ltd. was included in the scope of consolidation as a result ofadditional acquisition of shares. Fine Crystal Precision (S.Z.) Co., Ltd.
was included in the scope of consolidation as a result of establishmentof the company. Nikko Materials Co., Ltd. was excluded from the scopeof consolidation, after Nikko Materials Co., Ltd. was absorbed by Nikko
Techno Co., Ltd.
Certain foreign subsidiaries are consolidated on the basis of fiscal
periods ended December 31, which differ from that of the Company.
However, the necessary adjustments have been made if the effect ofthe difference is material.
Investments in subsidiaries and affiliates which are neither
consolidated nor accounted for by the equity method are carried at costor less. Where there has been a permanent decline in the value of suchinvestments, the Company has written them down.
Differences between the cost and the underlying net equity at fairvalue of investments in consolidated subsidiaries and in companies
accounted for by the equity method have been amortized by thestraight-line method over five years after acquisition and are included inselling, general and administrative expenses.
(b) Foreign currency translation
The balance sheet accounts of the foreign consolidated subsidiaries
are translated into yen at the rates of exchange in effect at the balance
sheet date, except for the components of net assets excluding minority
interests which are translated at their historical exchange rates.
Revenue and expense accounts are translated at the average rates of30

exchange in effect during the year. Differences arising from the translation are presented as translation adjustments and minority interests inthe consolidated financial statements.
Revenue and expense items arising from transactions denominatedin foreign currencies are generally translated into yen at the rates of
exchange in effect at the respective transaction dates.
All monetary assets and liabilities denominated in foreign currencies
are translated into yen at the rates of exchange in effect at the balance
sheet date and differences arising from the translation are included in
the consolidated statements of income.
(c) Cash equivalents
Short-term investments with a maturity of three months or less whenpurchased which can easily be converted to cash and are subject tolittle risk of change in value are considered to be cash equivalents.
(d) Inventories
Real estate held for sale, finished products and work in process arestated the lower of cost or net realizable value determined principallyby the specific identification method. Raw materials are stated at thelower of cost or replacement cost determined principally by the moving
average method.
(e) Investment securities
Marketable securities classified as other securities are carried at fairvalue with changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in net assets. Non-marketablesecurities classified as other securities are carried at cost. Cost of
securities sold is determined by the moving average method.
(f) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for possible bad debts
at an amount estimated based on the historical experience with bad
debts on normal receivables plus an additional allowance for specificuncollectible amounts determined by reference to the collectability of
individual doubtful accounts.
(g) Provision for warranties for completed construction
The Company provides a provision for warranties for completed
construction by estimating losses on possible future claims.
(h) Provision for loss on construction contracts
The Company provides a provision for loss on construction contracts,
which has not been delivered by the fiscal year end, by estimating theamount of total losses anticipated in the following fiscal year and thereafter to be incurred, when the amounts can be reasonably estimated.
(i) Property, plant and equipment and depreciation
Property, plant and equipment is stated on the basis of cost.
Depreciation of property, plant and equipment is determined by the
declining-balance method over the estimated useful lives of the respective assets, except for buildings to which the straight-line method isapplied.
Significant renewals and additions are capitalized at cost.
Maintenance and repairs are charged to income as incurred.
(j) Leases and depreciation
Finance lease transactions which do not stipulate the transfer of ownership of the leased assets to the lessee are accounted for as purchaseand sales transactions.

With regard to the depreciation method of leased assets, thestraight-line method is applied using the lease period as the estimateduseful life and a residual value of zero.
(k) Retirement benefits
An employee whose employment is terminated is entitled, in mostcases, to a lump-sum severance payment determined by reference tothe current basic rate of pay, length of service and the conditions underwhich the termination occurs.
Accrued retirement benefits for employees have been provided
primarily at an amount calculated based on the retirement benefit
obligation and the fair value of the pension plan assets at the balance
sheet date, as adjusted for prior service cost and unrecognized actuarial
gain or loss. The retirement benefit obligation is attributed to eachperiod by the straight-line method over the estimated years of service ofthe eligible employees.
Prior service cost is being amortized as incurred by the straight-line
method over ten years, which is shorter than the average remaining
years of service of the eligible employees.
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method over ten
years, which is shorter than the average remaining years of service ofthe employees participating in the plans.
(l) Income taxes
Deferred tax assets and liabilities have been recognized in the
consolidated balance sheets with respect to the differences between
financial reporting and the tax bases of the assets and liabilities, and aremeasured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
(m) Research and development expenses
Research and development expenses are charged to income whenincurred.
(n) Revenue and cost recognition
Revenues on sales of products are generally recognized at the time of
shipment.
Revenues and costs, of which the percentage of completion canbe reliably estimated, are recognized by the percentage-of-completion
method. The percentage of completion is calculated at the cost incurred
as a percentage of the estimated total cost. The completed-contract
method is applied to contracts for which the percentage of completioncannot be reliably estimated.
(o) Derivative financial instruments
Derivative financial instruments are carried at fair value. Gain or loss
on derivatives designated as hedging instruments is deferred as acomponent of net assets until the loss or gain on the underlying hedged
items is recognized. Foreign currency receivables and payables aretranslated at the applicable forward foreign exchange rates when certain
conditions are met. In addition, the related interest differential paid or
received under interest-rate swaps utilized as hedging instruments is
recognized over the terms of the swap agreements as an adjustment
to the interest expense of the underlying hedged items when certain
conditions are met.
(p) C onsumption tax
Accounting treatment of consumption tax is the tax exclusion method.

(q) Provision for directors’ bonuses
Provision for directors’ bonuses is provided based on estimatedamounts to be paid in the subsequent period that are applicable to thecurrent period.
(r) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is provided based on
estimated amounts determined by internal rules.
(s) Standards issued but not yet effective
On May 17, 2012, the ASBJ issued “Accounting Standard for
Retirement Benefits” (ASBJ Statement No. 26) and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25),
which replaced the Accounting Standard for Retirement Benefits that
had been issued by the Business Accounting Council in 1998 with aneffective date of April 1, 2000 and the other related practical guidance,
being followed by partial amendments from time to time through 2009.
The major changes are as follows:(i)	Treatment in the balance sheet — Actuarial gains and losses andprior service cost that have yet to be recognized in profit or loss shallbe recognized within net assets (accumulated other comprehensive
income), after adjusting for tax effects, and the deficit or surplus shallbe recognized as a liability (liability for retirement benefits) or asset(asset for retirement benefits).
(ii)	Treatment in the statement of income and the statement of comprehensive income — Actuarial gains and losses and prior service
cost that arose in the current period and have yet to be recognizedin profit or loss shall be included in other comprehensive income
and actuarial gains and losses and prior service cost that wererecognized in other comprehensive income in prior periods and thenrecognized in profit or loss in the current period shall be treated asreclassification adjustments.
This standard and related guidance are effective as of the end of fiscal years beginning on or after April 1, 2013. The Company is currently
evaluating the effect these modifications will have on its consolidated
results of operations and financial position.
3. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollars is included solely forconvenience, as a matter of arithmetic computation only, at ¥94.05 =U.S.$1.00, the approximate rate of exchange prevailing on March 29,
2013. This translation should not be construed as a representation that
all amounts shown could be converted into U.S. dollars at such rate.
4. Inventories
Inventories at March 31, 2013 and 2012 consisted of the following:
Millions of Yen
2013
2012

Real estate held for sale ............
Finished products .....................
Work in process .......................
Raw materials and supplies ......
Total....................................

¥    18
1,363
53,428
4,705¥59,516¥    18
1,431
72,706
5,192¥79,348

Thousands of
U.S. Dollars
2013$    191
14,492568,081
50,027$632,812

Work in process related to construction contracts of which a loss
is anticipated to be incurred was offset with a provision for loss on
construction contracts of ¥2,035 million ($21,637 thousand) at March
31, 2013 and ¥2,391 million at March 31, 2012.

31

5. Depreciation
Depreciation expense on property, plant and equipment for the years
ended March 31, 2013 and 2012 were as follows:
Millions of Yen
2013
2012

Depreciation expense ...............

¥16,061¥19,252

Thousands of
U.S. Dollars
2013$170,771

6. Advanced Depreciation
Accumulated advanced depreciation related to government grants
received has been deducted directly from the acquisition costs ofcertain tangible fixed assets (plant, machinery and equipment). Suchaccumulated depreciation at March 31, 2013 and 2012 are summarized
as follows:
Millions of Yen
2013
2012

Accumulated advanced
depreciation expense..............

¥1,286¥1,287

Thousands of
U.S. Dollars
2013$13,674

7. Contingent Liabilities
Contingent liabilities at March 31, 2013 and 2012 consisted of thefollowing:
Millions of Yen
2013
2012

As endorsers of trade notes receivable:
Discounted to banks..............
Endorsed to other..................
As guarantors of loans:	Muroran Environmental Plant
Service Co., Ltd. .................
Gotsu Wind Power Co., Ltd. ....
	Uncollected receivables inleasing companies................
Employees and other.............

¥   3070¥   23
85

Thousands of
U.S. Dollars
2013Long-term debt

Year ending March 31,

Millions of Thousands of
Yen
U.S. Dollars

2014....................................
2015....................................
2016....................................
2017....................................
2018....................................
2019 and thereafter..............

¥    — $     — ¥10,530 $111,962
—
—
2,660
28,283
10,000 106,326
10,940 116,321
—
—
175
1,861
—
—
4,030
42,850————Year ending March 31,

Millions of Thousands of
Yen
U.S. Dollars

2014....................................
2015....................................
2016....................................
2017....................................
2018....................................
2019 and thereafter..............

¥874
598
389
220
105
16

Lease obligations

588
1,509

586
1,633

6,252
16,045

16
238

16
355

170
2,531

Thousands of
U.S. Dollars
2013¥28,335¥37,535$301,276(10,530)
2,203(13,670)
3,187(111,962)
23,424(874)(1,520)(9,293)

10,00010,000106,326¥29,134¥35,532$309,771$9,293
6,358
4,136
2,339
1,116
170

9. Research and Development Expenses
Research and development expenses included in manufacturing costs,
and selling, general and administrative expenses for the years ended
March 31, 2013 and 2012 were as follows:
Millions of Yen
2013
2012

Research and development
expenses.................................

Millions of Yen
2013
2012

32

Bonds
Millions of Thousands of
Yen
U.S. Dollars$   319744

8. Short-Term Borrowings and Long-Term Debt
All short-term borrowings, with interest at annual rates ranging from
0.57% to 2.1% at March 31, 2013 and 0.636% to 1.975% at March 31,
2012, were unsecured.
Long-term debt at March 31, 2013 and 2012 were as follows:

Loans from banks andinsurance companies withinterest at annual rates ranging
from 0.19% to 2.3%................
	Less those maturing within
one year...............................
Lease obligations.......................
	Less those maturing within
one year...............................
0.48% straight bonds,
due 2015.................................
Long-term indebtedness
reflected in the consolidatedbalance sheets........................

The aggregate annual maturities of long-term debt and lease obligations
subsequent to March 31, 2013 are summarized as follows:¥4,054¥4,626

Thousands of
U.S. Dollars
2013$43,105

10. Other Income (Expenses) — Other, Net
The details of “Other, net” in “Other income (expenses)” for the years
ended March 31, 2013 and 2012 were as follows:
Millions of Yen
2013
2012

Cancellation fee received...........
Amortization of negative
goodwill...................................
Equity in earnings of affiliates.....
Provision for warranties forcompleted construction...........
Gain on sales of property,
plant and equipment................
Gain on negative goodwill..........
Loss on sales or disposal ofproperty, plant andequipment...............................
Loss on write-downs ofinvestment securities...............
Loss on valuation ofmembership............................
Impairment loss.........................
Other, net..................................
Total....................................

Thousands of
U.S. Dollars
2013¥ 2,099¥   34$ 22,318

71
0

71
—

755
0

(2,393)(1,096)(25,444)

34
57

85
—

362
606

(1,931)(411)(20,532)(13)(2,303)

(138)

(6)
(446)
748
¥(1,780)

(12)
—
155
¥(3,476)(64)(4,742)
7,953$(18,926)11. Loss on Impairment of Fixed Assets
Loss on impairment of fixed assets recognized by the Company and acertain consolidated subsidiary for the year ended March 31, 2013 was
as follows:
Location
Use
Classification
Iruma-shi, Saitama prefecture
Idle assets Buildings and other
Guangdong province, China(a subsidiary engaged in the
Steel and Energy Products)

OperatingassetsBuildings and Structures.............................
Machinery...................................................
Equipment..................................................
Total........................................................

Millions ofYen

Thousands of
U.S. Dollars

¥356
87
3
¥446

$3,785925
32$4,742The Company and its consolidated subsidiaries principally use net
realizable value for calculating the recoverable amount.
12. Other Comprehensive Income
The following table presents reclassification adjustments and tax effects
allocated to each component of other comprehensive income for theyear ended March 31, 2013 and 2012:
Millions of Yen
2013
2012

Unrealized holding gain (loss)
on securities:
	Amount arising during theyear......................................
	Reclassification adjustments
for gains and losses realized
in net income........................
		The amount of unrealized
holding gain (loss) on
securities before tax effect....
		Tax effect............................
		Unrealized holding gain
(loss) on securities.............
Unrealized gain (loss) fromhedging instruments:
	Amount arising during theyear......................................
		Tax effect............................
		Unrealized gain (loss) fromhedging instruments..........
Translation adjustments:
	Amount arising during theyear......................................
		Translation adjustments......
			Total other comprehensive
income...........................

¥1,672

Number of shares

Machinery and other

The Company and its consolidated subsidiaries group their assets
by classifying them into the smallest independent cash flow generating
units on the basis of managerial accounting, whereas idle assets aregrouped on an individual basis.
Regarding the above assets, the Company and its consolidated
subsidiaries marked down the book value of these asset groups, due
to their significant decline in profitability and/or market price, to theirrecoverable amounts.
The resulting impairment loss for the year ended March 31, 2013
was as follows:
Classification

13. Supplementary Information for Consolidated Statements of
Changes in Net Assets
Year ended March 31, 2013(a) Information regarding the number and type of shares issued andtreasury stock:¥(2,571)

Thousands of
U.S. Dollars
2013$17,778

13

2,013

138

1,686
(596)

(558)
256

17,927(6,337)

1,089

(302)

11,579

(433)
163

(272)
107

(4,604)
1,733

(269)

(164)

(2,860)

185
185

(68)
(68)

1,967
1,967

¥1,004¥  (535)$10,675

Shares issued:
Common stock.......
Treasury stock:	Common stock(Notes 1 and 2)......

Decreaseduringthe yearYear ended
March 31,2013

Year ended
March 31,
2012

Increaseduringthe year

371,463,036——

371,463,036

621,564

11,507860

632,211

Notes 1: The increase in treasury stock — common stock of 11,507
was due to the acquisition of fractional shares of less than oneunit.
2: The decrease in treasury stock — common stock of 860 was
due to sales of fractional shares of less than one unit.
(b) Dividends(i) Dividends paid to shareholders
		 ① Resolution:Annual general meeting ofshareholders held on June 26, 2012
			 Type of shares:
Common stock			Total amount ofdividends:¥1,854 million ($19,713 thousand)			 Dividends per share:¥5 ($0.053)
			 Cut-off date:
March 31, 2012
			 Effective date:June 27, 2012		 ② Resolution:				 Type of shares:				Total amount ofdividends:				 Dividends per share:				 Cut-off date:				 Effective date:Meeting of Board of Directors held on
October 29, 2012
Common stock¥1,854 million ($19,713 thousand)¥5 ($0.053)
September 30, 2012
December 3, 2012(ii)	Dividends of which the cut-off date was in the year ended March
31, 2013, but the effective date is in the following fiscal year
Resolution:Annual general meeting ofshareholders held on June 25, 2013
Type of shares:
Common stockTotal amount ofdividends:¥1,854 million ($19,713 thousand)
Dividends per share:¥5 ($0.053)
Cut-off date:
March 31, 2013
Effective date:June 26, 2013
	Source of dividends:
Retained earnings

33

Year ended March 31, 2012(a) Information regarding the number and type of shares issued andtreasury stock:
Number of sharesYear ended
March 31,2011

Shares issued:
Common stock.......
Treasury stock:	Common stock(Notes 1 and 2)......

371,463,036

299,234

Increaseduringthe year

Decreaseduringthe year—322,733—

403

Year ended
March 31,2012

621,564(b) Dividends(i) Dividends paid to shareholders
		 ① Resolution:Annual general meeting ofshareholders held on June 24, 2011
			 Type of shares:
Common stock			Total amount ofdividends:¥2,226 million
			 Dividends per share:¥6			 Cut-off date:
March 31, 2011
			 Effective date:June 27, 2011				 Type of shares:				Total amount ofdividends:				 Dividends per share:				 Cut-off date:				 Effective date:Meeting of Board of Directors held on
November 7, 2011
Common stock¥1,855 million¥5
September 30, 2011
December 5, 2011(ii)	Dividends of which the cut-off date was in the year ended March
31, 2012, but the effective date is in the following fiscal year
Resolution:Annual general meeting ofshareholders held on June 26, 2012
Type of shares:
Common stockTotal amount ofdividends:¥1,854 million
Dividends per share:¥5
Cut-off date:
March 31, 2012
Effective date:June 27, 2012
	Source of dividends:
Retained earnings

34

Millions of Yen
2013
2012

371,463,036

Notes 1: T he increase in treasury stock — common stock of 4,960 was
due to the acquisition of fractional shares of less than one unit
and common stock of 317,773 was due to the repurchase ofshares held by lost shareholders.
2: T he decrease in treasury stock — common stock of 403 wasdue to sales of fractional shares of less than one unit.

		 ② Resolution:

14. Cash Flow Information(a) Cash and cash equivalents
The reconciliation between cash and cash equivalents in the accompanying consolidated statements of cash flows and cash on hand and inbanks in the accompanying consolidated balance sheets at March 31,
2013 and 2012 are summarized as follows:

Cash on hand and in banks
in the consolidatedbalance sheet..........................
Investments with maturities ofthree months or less from thedate of acquisition...................
Time deposits with maturities ofmore than three months..........
Cash and cash equivalents inthe consolidated statement ofcash flows...............................

Thousands of
U.S. Dollars
2013¥51,005¥48,148$542,318

—

31

—

(32)

(72)

(340)

¥50,972¥48,107$541,967(b) Significant transactions without cash flows
Assets and liabilities corresponding to finance lease transactions thathave been recorded by the Company and its domestic consolidated
subsidiaries at March 31, 2013 and 2012 were as follows:
Millions of Yen
2013
2012

Thousands of
U.S. Dollars
2013

Lease assets.............................

¥732

¥646

$7,783

Lease obligations.......................

766

675

8,145

(c) Summary of assets acquired and liabilities assumed through theacquisition of shares of YPK Co., Ltd. for the year ended March 31,
2013, relating acquisition costs and net proceeds:

Current assets............................................
Noncurrent assets......................................
Current liabilities.........................................
Noncurrent liabilities....................................
Negative goodwill.......................................
Company’s interest prior to the date ofacquisition................................................
Acquisition costs of YPK Co., Ltd. .............
Cash and cash equivalents(YPK Co., Ltd.).........................................
Net proceeds from acquisition of
YPK Co., Ltd............................................

Millions ofYen

Thousands of
U.S. Dollars¥6,285394(5,926)(225)(55)$66,826
4,189(63,009)(2,392)
(585)

(308)
164

(3,275)
1,744

(665)

(7,071)¥  500$ 5,316

15. Leases
Year ended March 31, 2013
Future minimum lease payments subsequent to March 31, 2013 under
non-cancelable operating leases are summarized as follows:Year ending March 31,

2014.........................................
2015 and thereafter...................
Total....................................

Millions of Yen

Thousands of
U.S. Dollars¥2,846
5,291¥8,138$30,260
56,257$86,528

Year ended March 31, 2012
Future minimum lease payments subsequent to March 31, 2012 under
non-cancelable operating leases are summarized as follows:Year ending March 31,

2013.........................................
2014 and thereafter...................
Total....................................

Millions of Yen¥ 2,819
7,373¥10,193

16. Financial Instruments
Overview(a) Policy for financial instruments
In consideration of plans for operations and capital investment, theCompany and its consolidated subsidiaries (collectively, the “Group”)
utilize funds provided by operating cash flows first. The Group uses
bond issuances and bank borrowings in order to raise additional funds,
if needed. The Company manages temporary cash surpluses throughlow-risk financial assets. The Company uses derivatives for the purposeof reducing risks and does not enter into derivatives contracts for
speculative or trading purposes.
(b) Types of financial instruments and related risk
Trade receivables — trade notes and accounts receivable — areexposed to credit risk in relation to customers. In addition, the Company
is exposed to foreign currency exchange risk arising from receivables
denominated in foreign currencies. The foreign currency exchange risks
deriving from the trade receivables denominated in foreign currencies
are hedged by forward foreign exchange contracts, if needed.
Investment securities are exposed to market risk. These securities
are mainly composed of the shares of companies with which theCompany has business relationships.
Trade payables — trade notes and accounts payable — have payment due dates within one year. Since the Company is exposed to foreign currency exchange risk arising from those payables denominatedin foreign currencies, forward foreign exchange contracts are arranged
to reduce the risk, if needed.
Loans payable and bonds are used to raise funds mainly in connection with capital investments. The repayment dates of the long-term
debts extend up to five years from the balance sheet date. Long-term
debt with variable interest rates is exposed to interest rate fluctuation
risk. However, to reduce such risk and fix the interest payments forlong-term debt with variable rates, the Company utilizes interest rate
swap transactions as hedging instruments.
Regarding derivatives, the Company enters into forward foreignexchange contracts to reduce the foreign currency exchange risk arisingfrom the receivables and payables denominated in foreign currencies.
The Company also enters into interest rate swap transactions to reduce
the fluctuation risk of interest payments for long-term debt with variable
rates.
Information regarding the method of hedge accounting, hedging
instruments and hedged items, hedging policy, and the assessment of
the effectiveness of hedging activities is found in Note 2 (o).

(c) Risk management for financial instruments(i)	Monitoring of credit risk (the risk that customers or counterparties
may default)
In accordance with the internal policies of the Company for
managing credit risk arising from receivables, each related divisionmonitors credit worthiness of their main customers periodically,
and monitors due dates and outstanding balances by individual
customer. In addition, the Company is making efforts to identify
and mitigate risks of bad debts from customers who are having
financial difficulties. The consolidated subsidiaries also manage
credit risk using the Company’s internal policies and methods.
The Company also believes that the credit risk of derivatives
is insignificant as it enters into derivative transactions only withfinancial institutions which have a high credit-rating.
(ii)	Monitoring of market risk (the risk arising from fluctuations inforeign exchange rates, interest rates and others)
For trade receivables and payables denominated in foreign
currencies, the Company identifies the foreign currency exchange
risk for each currency on a monthly basis and enters into forward
foreign exchange contracts to hedge such risk. In order tomitigate the interest rate risk for loans payable bearing interest at
variable rates, the Company may also enter into interest rate swap
transactions.
For investment securities, the Company periodically reviews
the fair values of such financial instruments and the financial
position of the issuers. In addition, the Company continuously
evaluates whether securities should be maintained taking into
account their fair values and relationships with the issuers.
In conducting derivative transactions, the division in chargeof each derivative transaction follows the internal policies, which
set forth delegation of authority. Monthly reports including actual
transaction data are submitted to top management for theirreview. The consolidated subsidiaries also conduct derivativetransactions using the Company’s internal policies.
(iii)	Monitoring of liquidity risk (the risk that the Company may not beable to meet its obligations on scheduled due dates)
Based on the report from each division, the Company preparesand updates its cash flow plans on a timely basis to manage
liquidity risk. The consolidated subsidiaries manage the liquidity
risk using cash flow plans and report to the Company periodically.
(d) Supplementary explanation of the estimated fair value of financial
instruments
The fair value of financial instruments is based on their quoted market
price, if available. When there is no available quoted market price, fairvalue is reasonably estimated. Since various assumptions and factors
are reflected in estimating the fair value, different assumptions and factors could result in different fair value. In addition, the notional amountsof derivatives in Note 18 Derivative Transactions are not necessarily
indicative of the actual market risk involved in derivative transactions.

35

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance
sheet as of March 31, 2013 and estimated fair value are shown in thefollowing table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Pleaserefer to Note (ii) below).
Year ended March 31, 2013
Millions of Yen

AssetsCash on hand and in banks......
	Trade notes and accounts
receivable...............................
Securities:
		Other securities.....................
Total assets.................................
Liabilities	Trade notes and accounts
payable..................................
Short-term borrowings.............
	Current portion of long-term
debt .......................................
	Bonds......................................
Long-term debt........................
Total liabilities..............................
Derivatives (*)...............................

Carrying
amountEstimated
fair value

Difference¥ 51,005¥ 51,005¥ —51,97051,967(3)

25,715¥128,691

25,715¥128,687—¥  (3)¥ 42,216
12,703¥ 42,216
12,703¥ ——10,53010,562
10,00010,03417,805
17,929¥ 93,255 ¥ 93,446¥   (534) ¥   (534)

32
34
124
¥190
—

AssetsCash on hand and in banks......
	Trade notes and accounts
receivable...............................
Securities:
		Other securities.....................
Total assets.................................
Liabilities	Trade notes and accounts
payable..................................
Short-term borrowings.............
	Current portion of long-term
debt .......................................
	Bonds......................................
Long-term debt........................
Total liabilities..............................
Derivatives (*)...............................

Estimated
fair value

Difference$  542,318 $  542,318$   —

552,578

552,547(32)

273,418
273,418$1,368,325 $1,368,283—$   (32)$  448,868 $  448,868
135,066
135,066$   ——

111,962
112,302106,326
106,688
189,314
190,633$  991,547 $  993,578$    (5,678) $    (5,678)

340
362
1,318
$2,020—(*) The value of assets and liabilities arising from derivatives is shown at
net value, with the amount in parentheses representing net liability
position.

36

Millions of Yen

AssetsCash on hand and in banks......
	Trade notes and accounts
receivable...............................
Securities:		Other securities withmaturities............................
		Other securities.....................
Total assets.................................
Liabilities	Trade notes and accounts
payable..................................
Short-term borrowings.............
	Current portion of long-term
debt .......................................
	Bonds......................................
Long-term debt........................
Total liabilities..............................
Derivatives (*)...............................

Carrying
amountEstimated
fair value

Difference¥ 48,148¥ 48,148¥ —46,52046,515(5)

31
24,087¥118,788

31
24,087¥118,783

—
—
¥ (5)

¥ 41,672
12,885¥ 41,672
12,885¥ ——13,67013,67910,00010,02723,86524,068¥102,092 ¥102,332¥    (100) ¥    (100)

9
27
203
¥240
—

(*) The value of assets and liabilities arising from derivatives is shown at
net value, with the amount in parentheses representing net liability
position.
(i) Method to determine the estimated fair value of financial instruments
and other matters related to securities and derivative transactions

Thousands of U.S. Dollars
Carrying
amountYear ended March 31, 2012

AssetsCash on hand and in banks
The carrying amount is used for bank deposits without maturities,
because the fair value approximates the carrying value. The fair valueof time deposits in banks with maturities is calculated based on thepresent value of the total principal and interest discounted at a rate
supposing a newly made deposit.
Trade notes and accounts receivables
The fair value is calculated by categories of the remaining periodsof the receivables based on the present value using discount rates
determined by the period to maturity and credit risk.
Securities
The carrying amount is used for other securities with maturities,
because the fair value approximates the carrying amount.
		 Quoted market price is used for other securities.
Liabilities
Trade notes and accounts payable and short-term borrowings
The carrying amount is used for these items because the fair value
approximates the carrying amount.
Current portion of long-term debt, bonds and long-term debt
The fair values are calculated by applying a discount rate, based on
the assumed interest rate if a similar new debt is issued, to the totalof the principal and interest. The current portion of long-term debt
and long-term debt with variable interest rates are subject to thespecial treatment of interest rate swaps and is calculated by applying
a discount rate, based on the assumed interest rate if a similar new
debt is issued, to the total of the principal and interest including thatof the interest rate swap.
Derivative Transactions
Please refer to Note 18, Derivative Transactions, of the notes to theconsolidated financial statements.

(ii) Financial instruments for which it is extremely difficult to determine
the fair value
Millions of Yen
2013
2012

Unlisted stocks..........................

¥1,949Thousands of
U.S. Dollars
2013¥1,967$20,723

Because the fair values of these financial instruments are extremely
difficult to determine, given that they do not have quoted market prices
and future cash flows cannot be estimated, they are not included in“Securities” in the preceding table.
(iii) Redemption schedule for receivables and securities with maturities at
March 31, 2013 and 2012.
Year ended March 31, 2013
Millions of Yen
Due after
one year
Due in one through five
years
year or less

Cash on hand and in banks.........
Trade notes and accounts
receivable..................................
Total............................................

¥ ——51,275¥102,280

695
¥695

—
—

Thousands of U.S. Dollars
Due after
one year
Due in one through five
years
year or lessDue after
five years

$   —

—

7,390
$7,390——Year ended March 31, 2012
Millions of Yen
Due after
one year
Due in one through five
years
year or less

Cash on hand and in banks.........
Trade notes and accounts
receivable..................................
Securities:
	Other securities withmaturities...............................
Total............................................

Millions of Yen

Due in 1 year or less....................
Due after 1 year through2 years......................................
Due after 2 years through3 years......................................
Due after 3 years through4 years......................................
Due after 4 years through5 years......................................
Due after 5 years.........................

Due after
five years¥48,148¥  ——

45,709811—

31¥93,889

—
¥811

—
—

Bonds

Long-term
loans

Lease
obligations¥    —¥10,530

¥874

—

2,660

598

10,00010,940

389

—

175

220

—
—

4,030
—

105
16

Thousands of U.S. Dollars

Due after
five years¥ 51,005

Cash on hand and in banks......... $  542,318
Trade notes and accounts
receivable..................................
545,189
Total............................................ $1,087,507(iv) The redemption schedule for long-term debt
Year ended March 31, 2013

Due in 1 year or less....................
Due after 1 year through2 years......................................
Due after 2 years through3 years......................................
Due after 3 years through4 years......................................
Due after 4 years through5 years......................................
Due after 5 years.........................

Bonds

Long-term
loans

Lease
obligations$     —

$111,962$9,293—28,283

6,358

106,326

116,321

4,136

—

1,861

2,339

—
—

42,850
—

1,116
170

Year ended March 31, 2012
Millions of Yen

Due in 1 year or less....................
Due after 1 year through2 years......................................
Due after 2 years through3 years......................................
Due after 3 years through4 years......................................
Due after 4 years through5 years......................................
Due after 5 years.........................

Bonds

Long-term
loans

Lease
obligations¥     —

¥13,670¥1,520—10,370

783

—

2,550

474

10,00010,830

251

—
—

115
—

109
48

17. Securities
Other securities:
March 31, 2013
Millions of Yen

Carrying amount exceeding theacquisition cost:
Stocks......................................
Carrying amount not exceeding
the acquisition cost:
Stocks......................................
		
Total...............................

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥ 5,410¥10,457¥5,047

17,663¥23,073

14,900¥25,357(2,763)¥2,28437

Thousands of U.S. Dollars

Carrying amount exceeding theacquisition cost:
Stocks......................................
Carrying amount not exceeding
the acquisition cost:
Stocks......................................
		
Total...............................

Acquisition
cost

Carrying
amountUnrealized
gain (loss)$ 57,523$111,186$53,663

187,804$245,327

158,426$269,612(29,378)$24,285

March 31, 2012
Millions of Yen

Carrying amount exceeding theacquisition cost:
Stocks......................................
Carrying amount not exceeding
the acquisition cost:
Stocks......................................
		
Total...............................

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥ 8,475¥11,746¥3,271

14,393¥22,869

11,720¥23,466(2,673)¥  597

When their fair values have declined by 50% or more, impairment losses
are recorded on those securities. When their fair values have declined
by 30% up to 50%, impairment losses are recorded on those securities
on an individual basis to the values considered to be recoverable.
18. Derivative Transactions(a) Derivatives not subject to hedge accounting
Year ended March 31, 2013
None applicableYear ended March 31, 2012
None applicable(b) Derivatives subject to hedge accounting
The contract amounts or the amount corresponding to principal as specified by the contract as of the date of the closing of the consolidated
accounts is shown below by type of hedge accounting method.
(i) Currency-related transactions
Year ended March 31, 2013
Hedge accounting method

Allocation method

Hedge accounting method

Allocation method

Type of derivative

Foreign exchange forward contracts Notes and accounts receivable
Sell:
U.S. dollars........................................................................................
Euros................................................................................................
Canadian dollars ...............................................................................
Hong Kong dollars.............................................................................
Foreign exchange forward contracts Notes and accounts payable
Buy:
U.S. dollars........................................................................................
Euros................................................................................................
Sterling pound...................................................................................
Hong Kong dollars.............................................................................

Type of derivative

Principal items hedged

Foreign exchange forward contracts Notes and accounts receivable
Sell:
U.S. dollars........................................................................................
Euros................................................................................................
Canadian dollars ...............................................................................
Hong Kong dollars.............................................................................
Foreign exchange forward contracts Notes and accounts payable
Buy:
U.S. dollars........................................................................................
Euros................................................................................................
Sterling pound...................................................................................
Hong Kong dollars.............................................................................

Note: Calculation of fair value is based on the forward exchange rates.
38

Principal items hedged

Millions of Yen
Contract amount

Fair valueOver one year
¥8,284
751
22
12

¥298
84
—
—

¥(774)(44)
0(1)¥5,003
521
120
7

—
—
—
—

¥ 229
48
8
(0)

Thousands of U.S. Dollars
Contract amount
Fair valueOver one year
$88,081
7,985
234
128

$3,169893——$(8,230)
(468)
0
(11)

$53,195
5,540
1,276
74

—
—
—
—

$ 2,435510
85(0)Year ended March 31, 2012
Hedge accounting method

Allocation method

Type of derivative

Principal items hedged

Foreign exchange forward contracts Notes and accounts receivable
Sell:
U.S. dollars........................................................................................
Euros................................................................................................
Foreign exchange forward contracts Notes and accounts payable
Buy:
U.S. dollars........................................................................................
Euros................................................................................................
Sterling pound...................................................................................

Millions of Yen
Contract amount

Fair valueOver one year
¥7,957
275

¥290
66

¥(200)(8)¥2,697
954
116

¥ 84
—
—

¥  69
31
8

Note: Calculation of fair value is based on the forward exchange rates.
(ii) Interest-related transactions
Year ended March 31, 2013
Hedge accounting method

Special treatment forinterest rate swaps

Type of derivative

Principal items hedged

Receive/floating and pay/fixed

Hedge accounting method

Type of derivative

Fair valueOver one year
Current portion of long-termborrowings
Long-term borrowings................

Special treatment forinterest rate swaps

Millions of Yen
Contract amountPrincipal items hedged¥14,100¥4,000(*)

Thousands of U.S. Dollars
Contract amount
Fair value

Receive/floating and pay/fixedOver one year
Current portion of long-termborrowings
Long-term borrowings................

$149,920$42,531(*)(*) Since interest rate swap contracts accounted for by the special treatment for interest rate swaps are treated together with the long-term borrowings subject to hedging, the estimated fair value of such interest rate swap contracts is included in the estimated fair value of the corresponding long-term borrowings.
Note: C alculation of fair value is based on the stated price by financial institutions.
Year ended March 31, 2012
Hedge accounting method

Special treatment forinterest rate swaps

Type of derivative

Principal items hedged

Millions of Yen
Contract amount

Receive/floating and pay/fixed

Fair valueOver one year
Current portion of long-termborrowings
Long-term borrowings................

¥23,000¥10,000(*)(*) Since interest rate swap contracts accounted for by the special treatment for interest rate swaps are treated together with the long-term borrowings subject to hedging, the estimated fair value of such interest rate swap contracts is included in the estimated fair value of the corresponding long-term borrowings.
Note: C alculation of fair value is based on the stated price by financial institutions.

39

19. Employees’ Retirement Benefit Plans
The following table sets forth the funded and accrued status of theplans, and the amounts recognized in the accompanying consolidatedbalance sheets at March 31, 2013 and 2012 for the Company’s and theconsolidated subsidiaries’ defined benefit pension plans:

Retirement benefit obligation.....
Plan assets at fair value.............
Unfunded retirement benefit
obligation.................................
Unrecognized actuarial loss.......
Unrecognized prior service
cost.........................................
Net retirement benefit
obligation.................................
Accrued retirement benefits.......
Prepaid pension cost.................

Millions of Yen
2013
2012

Thousands of
U.S. Dollars
2013¥(25,153) ¥(26,300)
16,012
14,381$(267,443)
170,250(9,141)
2,611(11,918)
4,351(97,193)
27,762

274

414

2,913

(6,254)(7,152)(9,419)(9,695)¥  3,164 ¥  2,543(66,497)(100,149)$  33,642

The components of retirement benefit expenses for the years ended
March 31, 2013 and 2012 are outlined as follows:
Millions of Yen
2013
2012

Service cost...............................
Interest cost..............................
Expected return onplan assets..............................
Amortization of actuarial loss.....
Amortization ofprior service cost.....................
Retirement benefit expenses.....

Thousands of
U.S. Dollars
2013¥1,549289¥1,847
312$16,470
3,073

(204)
440

(206)
1,152

(2,169)4,678

140¥2,214140¥3,246

1,489$23,541

The assumptions used in accounting for the above plans were as
follows:
Discount rate...........................................
Expected rate of return on plan assets....

2013

2012

1.50%
1.50%

1.50%
1.50%

20. Income Taxes
The significant components of the Company’s deferred tax assets andliabilities at March 31, 2013 and 2012 were as follows:
Millions of Yen
2013
2012

Deferred tax assets:
Accrued enterprise taxes........
Accrued bonuses...................
	Unrealized gain on
intercompany transactions....
	Accrued retirement benefits
for employees.......................
	Accrued retirement benefits
for directors and corporate
auditors................................
	Loss on revaluation of
inventory items.....................
	Loss on revaluation offinancial instruments.............
Impairment loss......................
Depreciation...........................
	Amortization of deferredassets..................................
	Amortization of long-term
prepaid expenses.................
	Provision for warranties forcompleted construction........
	Provision for loss on
construction contracts..........
	Less allowance for doubtful
accounts...............................
Asset retirement obligations....
	Percentage-of-completion
method................................
Tax loss carry forwards..........
Deferred loss on hedges........
	Unrealized loss on
investment securities............
Other......................................
Gross deferred tax assets..........
Valuation allowance................
Total deferred tax assets...........
Deferred tax liabilities:	Reserve for advanced
depreciation.........................
	Reserve for special
depreciation.........................
Prepaid pension cost..............
	Disposal cost with asset
retirement obligations...........
	Unrealized gain on
investment securities............
Deferred gain on hedges........
Other......................................
Total deferred tax liabilities.........
Net deferred tax assets.............

40

Thousands of
U.S. Dollars
2013¥   2391,144¥   3261,215$  2,541
12,164

592

784

6,295

4,453

4,565

47,347

69

111

734

1,492

1,521

15,864

274
184
1,107

263
56
876

2,913
1,956
11,770

36

67

383

105

94

1,116

1,202

576

12,780

1,351

2,021

14,365

145
490

111
462

1,542
5,210

256
2,085
319

99
1,800
93

2,722
22,169
3,392

974
354
16,882(3,676)
13,205944
278
16,272(2,661)
13,611

10,356
3,764
179,500(39,086)
140,404

1,853

1,931

19,702

1,342
1,120

1,999
900

14,26911,909

289

297

3,073

1,794
117
34
6,551
¥ 6,653

1,156
55
23
6,363
¥ 7,248

19,075
1,244
362
69,654$ 70,739

The reconciliation between the effective tax rates reflected in the
consolidated statement of income and the statutory tax rates for theyears ended March 31, 2013 and 2012 were as follows:
Statutory tax rates.....................
Effect of:
Change in valuation allowance....
Tax credit...................................
Other.........................................
Effective tax rates......................

2013

2012

37.8%

40.5%

6.9
(1.9)
0.0
42.7%

(5.2)
(1.0)
3.7
37.9%

21. Business Combinations
Business combination through acquisition(a) Outline of business combination① Name and business of acquired company
Name: YPK Co., Ltd.
Business: S ales of injection molding machines, blow-molding
machines, extruders, vacuum forming machines andpowder processing machines, etc.
Installation services and international trading services② Main reason for the business combination
In order to increase its market share and improve businessefficiency of the group as a whole③ Date of business combination
April 1, 2012
④ Legal form of business combination
Cash payment in exchange for shares⑤ Name of company after business combinationYPK Co., Ltd.
⑥ Percentage of voting rights acquired
Percentage of voting rights held before the business combination:
46%
Percentage of voting rights acquired on the date of businesscombination: 54%
Percentage of voting rights held after the business combination:
100%⑦ Primary reason for determining the acquiring company
The Company was determined to be the acquiring company
because it acquired the shares in exchange for cash.
(b) Period for which earnings of the acquired company were included in
the consolidated financial statements
The earnings of the acquired company for the period from April 1, 2012
through March 31, 2013 are included in the Company’s consolidated
statement of income for the year ended March 31, 2013.
(c) Acquisition cost and breakdown
Acquisition price: ¥404 million ($4,296 thousand)Costs incurred directly in the acquisition: ¥2 million ($21 thousand)Acquisition cost: ¥407 million ($4,327 thousand)(d) Difference between the acquisition cost of the acquired company
and the aggregate acquisition cost of each transaction until thecompany was acquired¥65 million ($691 thousand)(e) Amount and reason for gain on negative goodwill① Amount¥120 million ($1,276 thousand)② Reason
The negative goodwill was generated because the fair value ofthe net assets acquired on the date of the business combination
exceeded the acquisition cost.

(f) Assets acquired and liabilities assumed at the date of businesscombination
Current assets: ¥6,285 million ($66,826 thousand)Fixed assets: ¥394 million ($4,189 thousand)Total assets: ¥6,680 million ($71,026 thousand)Current liabilities: ¥5,926 million ($63,009 thousand)Long-term liabilities: ¥225 million ($2,392 thousand)Total liabilities: ¥6,152 million ($65,412 thousand)Transactions under common control(a) Information on companies in business combinationi) Combination between Nikko Techno Co., Ltd. and Nikko Materials
Co., Ltd.
① Name and business of companies
Name of surviving company: Nikko Techno Co., Ltd.
Business: Machine processing, finishing turning, assembling ofiron, nonferrous metals and special alloys
Manufacturing and sales of processed products
Name of absorbed company: Nikko Materials Co., Ltd.
Business: Manufacturing, processing and sales of wooden moldand metal mold for iron castings, steel castings andcastings② Date of business combination
October 1, 2012
③ Legal form of business combination
Absorption-type merger with Nikko Techno Co., Ltd. as thesurviving company④ Name of company after business combination
Nikko Techno Co., Ltd.
⑤ Purpose and outline of transactions
The Company intends to construct an efficient and rational
operating structure. In addition, the Company plans to enhance
productivity and profitability, the effective use of humanresources and support a responsive organization.
ii) Establishment of Fine Crystal Precision (S.Z.) Co., Ltd.
① Name and business of companies
Name of companies: Fine Crystal (H.K.) Co., Ltd., Fine Crystal
Precision (S.Z.) Co., Ltd.
Business: Processing of low-pass filter for single-lens camera② Date of business combination
December 11, 2012
③ Legal form of business combination
Investment in kind in Fine Crystal Precision (S.Z.) Co., Ltd. bytransferring fixed assets possessed by Fine Crystal (H.K.) Co.,Ltd.
④ Name of company after business combination
Fine Crystal Precision (S.Z.) Co., Ltd.
⑤ Purpose and outline of transactions
Fine Crystal (H.K.) Co., Ltd. established a wholly owned
enterprise in connection with the change of the type of contract
with its contract manufacturer.
(b) Outline of the accounting treatment
The Company accounted for the transactions as transactions undercommon control based on the Accounting Standard for Business
Combinations (Accounting Standards Board of Japan (ASBJ),
Statement No. 21 issued on December 26, 2008) and the Guidanceon Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures (ASBJ Guidance No. 10, issued on
December 26, 2008).

41

22. Asset Retirement Obligations
The following table presents the changes in asset retirement obligations
for the years ended March 31, 2013 and 2012:
Millions of Yen
2013
2012

Balance at beginning of year......
Liabilities incurred due to theacquisition of property, plantand equipment........................
Accretion expense.....................
Liabilities settled........................
Other.........................................
Balance at end of year...............

23. Investment and Rental Properties
The Company has omitted the disclosure of investment and rental
properties due to immateriality for the years ended March 31, 2013 and2012.

Thousands of
U.S. Dollars
2013¥1,299¥1,371$13,812

—
19
(47)
100
¥1,371

—
19
(78)
(12)
¥1,299

—
202
(500)
1,063
$14,577

24. Segment Information
The reportable segments of the Group are components for which discrete financial information is available and whose operating results are regularly
reviewed by the Executive Committee to make decisions about resource allocation and to assess performance.
The Steel and Energy Products segment includes steel castings and forgings, steel plates, pressure vessels and steel structures. The Industrial
Machinery Products segment includes injection molding machines, film and sheet machinery, blow molding machines, magnesium injection molding
machines, waste treatment equipment and manufacturing equipment for electronic products. The Real Estate and Other Businesses segment
includes regional development.
Millions of Yen
Reportable segments

Year ended March 31, 2013

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales and operating income:Sales to third parties .....................................................
Intra-segment sales and transfers .................................
Total sales..........................................................................
Operating income ..............................................................

¥ 88,275
4,972
93,248¥   (534)¥130,138
2,164
132,302¥ 16,784¥ 2,2393,071
5,310¥   840¥220,653
10,207
230,861¥ 17,090¥     —
(10,207)(10,207)¥  (410)¥220,653—
220,653¥ 16,680

Assets, depreciation, and capital expenditures:
Total assets ..................................................................
Depreciation and amortization.......................................
Capital expenditures .....................................................

¥120,250
13,056
2,575¥ 96,895
2,580
2,860

¥13,396291
73¥230,542
15,928
5,509¥73,427
133
60¥303,970
16,061
5,570

Adjustments
andeliminations Consolidated

Thousands of U.S. Dollars
Reportable segments

Year ended March 31, 2013

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales and operating income:Sales to third parties .....................................................
Intra-segment sales and transfers .................................
Total sales..........................................................................
Operating income ..............................................................

$  938,596 $1,383,711
52,86523,009991,473
1,406,720$    (5,678) $  178,458$ 23,806
32,65356,459$  8,931$2,346,124
108,527
2,454,662$  181,712$      —
(108,527)(108,527)$  (4,359)$2,346,124—
2,346,124$  177,352

Assets, depreciation, and capital expenditures:
Total assets ..................................................................
Depreciation and amortization.......................................
Capital expenditures .....................................................

$1,278,575
138,820
27,379$142,435
3,094
776$2,451,271
169,357
58,575$780,723
1,414
638$3,232,004
170,771
59,224$1,030,250
27,43230,409Adjustments
andeliminations Consolidated

Notes 1: Adjustments and eliminations for segment profit of ¥410 million ($4,359 thousand) include elimination of inter-segment profit on inventories
and corporate general administration expense which are not allocable to a reportable segment.
2: A djustments and eliminations for segment assets of ¥73,427 million ($780,723 thousand) include offset of inter-segment debt and credit,
and corporate assets which are not allocable to a reportable segment.
3: Adjustments and eliminations for depreciation and amortization of ¥133 million ($1,414 thousand) include depreciation and amortization forcorporate assets.
		 Adjustments and eliminations for capital expenditures of ¥60 million ($638 thousand) include capital expenditures for corporate assets.

42

Millions of Yen
Reportable segments

Year ended March 31, 2012

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales and operating income:Sales to third parties .....................................................
Intra-segment sales and transfers .................................
Total sales..........................................................................
Operating income ..............................................................

¥105,001
4,285
109,286¥ 11,517¥113,959
3,335
117,294¥ 11,542¥ 2,407
2,983
5,390¥   776¥221,368
10,603
231,972¥ 23,837¥    —(10,603)(10,603)¥    74¥221,368—
221,368¥ 23,911

Assets, depreciation, and capital expenditures:
Total assets ..................................................................
Depreciation and amortization.......................................
Capital expenditures .....................................................

¥147,283
16,0836,238¥ 93,133
2,706
1,896

¥13,540
301
78¥253,956
19,091
8,213¥71,696
161
42¥325,653
19,252
8,256

Adjustments
andeliminations Consolidated

Notes 1: Adjustments and eliminations for segment profit of ¥74 million include elimination of inter-segment profit on inventories and corporate general administration expense which are not allocable to a reportable segment.
2: A djustments and eliminations for segment assets of ¥71,696 million include offset of inter-segment debt and credit, and corporate assets
which are not allocable to a reportable segment.
3: Adjustments and eliminations for depreciation and amortization of ¥161 million include depreciation and amortization for corporate assets.
		 Adjustments and eliminations for capital expenditures of ¥42 million include capital expenditures for corporate assets.
(a) Product and service information
Millions of Yen

Year ended March 31, 2013

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales to third parties....

¥88,275¥130,138¥2,239¥220,653(c) Significant customer information
The Company has omitted the disclosure of significant customer
information for the years ended March 31, 2013 and 2012 because no
individual customer accounted for more than 10% of net sales in the
consolidated statement of income.
(d) Information on loss on impairment of fixed assets
Impairment loss on fixed assets by reportable segment for the years
ended March 31, 2013 and 2012 are summarized as follows:Year ended March 31, 2013

Thousands of U.S. Dollars

Year ended March 31, 2013

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales to third parties....

$938,596 $1,383,711$23,806$2,346,124

Year ended March 31, 2012

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales to third parties....

¥105,001¥113,959¥2,407¥221,368

Millions of Yen
Steel andEnergyProducts

Millions of Yen

Impairment loss..........

(b) Geographical information(i) Sales

Japan....................................
China.....................................
Others...................................
Consolidated.........................

¥105,180
27,131
88,341¥220,653¥111,156
32,03878,173¥221,368

Thousands of
U.S. Dollars
2013

¥59

—

¥300

Total

¥446

Thousands of U.S. Dollars

Impairment loss..........
Millions of Yen
2013
2012

¥87

Industrial Real Estate Adjustments
andMachinery and Other
Products Businesses eliminations

Steel andEnergyProducts

Industrial Real Estate Adjustments
andMachinery and Other
Products Businesses eliminations

$925

$627

—

$3,190Total$4,742

Year ended March 31, 2012
None applicable$1,118,341
288,474
939,298$2,346,124

Note: Net sales information above is based on customer location.
(ii)	Tangible assets
The Company has omitted the disclosure of tangible assets bycountry or region as of March 31, 2013 and 2012 because theamount of tangible assets in Japan accounted for more than 90%of the carrying amount in the consolidated balance sheet.

43

(e) Amortization and balance of goodwill
The following table presents the amortization and balance of negative
goodwill arising from business combinations on or prior to March 31,
2010 as of and for the years ended March 31, 2013 and 2012 byreportable segment:
Millions of Yen
Industrial Real Estate Adjustments
andMachinery and Other
Products Businesses eliminations

Total

—

¥ 71

—

—

¥ 71

—

143

—

—

143

Steel andEnergyYear ended March 31, 2013 Products

Amortization...............
Balance as ofMarch 31..................

Thousands of U.S. Dollars
Steel andEnergyYear ended March 31, 2013 Products

Amortization...............
Balance as ofMarch 31..................

Industrial Real Estate Adjustments
andMachinery and Other
Products Businesses eliminations

Total

—

$  755——$  755

—

1,520

—

—

1,520

Steel andEnergyYear ended March 31, 2012 Products

Industrial Real Estate Adjustments
andMachinery and Other
Products Businesses eliminations

Total

Amortization...............
Balance as ofMarch 31..................

—

¥ 71

—

—

¥ 71

—

214

—

—

214

(f) Information on gain on negative goodwill
Year ended March 31, 2013
In the Industrial Machinery Products segment, YPK Co., Ltd. became
a consolidated subsidiary as a result of additional acquisition of shares.
This resulted in a gain on negative goodwill of ¥55 million ($585
thousand) in the fiscal year ended March 31, 2013. Furthermore, theCompany acquired additional shares of Meiki Co., Ltd., a consolidated
subsidiary. This also resulted in a gain on negative goodwill of ¥1 million($11 thousand) in the fiscal year ended March 31, 2013.

44

26. Amounts per Share
Net income per share is calculated based on the net income available
for distribution to shareholders of common stock and the weightedaverage number of shares of common stock outstanding during theyear. Net assets per share are calculated based on the number ofshares of common stock outstanding at year end. Amounts per shareat March 31, 2013 and 2012 and for the years then ended were as
follows:Yen

Net income................................
Net assets.................................

Millions of Yen

Year ended March 31, 2012
None applicable

25. Shareholders’ Equity
The Corporation Law of Japan provides that an amount equal to 10%of the amount to be disbursed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the capital stock account. Such distributions can bemade at any time by resolution of the meeting of shareholders, or by the
Board of Directors if certain conditions are met.

2013

2012

U.S. Dollars
2013¥ 22.33
359.29¥ 33.93344.28$0.24
3.82

Independent Auditor’s Report

45Corporate Directory
Stock Information

Corporate Data

Authorized Shares

Trade Name

1,000,000,000 shares

The Japan Steel Works, Ltd.

Issued and Outstanding Shares

Head Office371,463,036 shares
32,475Gate City Ohsaki-West Tower,
11-1, Osaki 1-chome,
Shinagawa-ku, Tokyo, Japan

Stock Listings

Foundation

Shareholders

November 1, 1907

Tokyo, Osaka*, Nagoya, Fukuoka and Sapporo

Paid-in Capital* The cash equity market of Osaka Securities Exchange was merged
into Tokyo Stock Exchange on July 16, 2013.

¥19,694 million

Transfer Agent and Registrar

Employees

Sumitomo Mitsui Trust Bank, Ltd.
4-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo, Japan

2,154 (Consolidated 4,804)

AuditorErnst & Young ShinNihon LLC
Hibiya Kokusai Bldg.,
2-3, Uchisaiwai-cho 2-chome,
Chiyoda-ku, Tokyo, Japan

Major Shareholders (holding %)The Master Trust Bank of Japan, Ltd.
(Trust Account)...................................................... 5.39%
Japan Trustee Services Bank, Ltd.
(Trust Account)...................................................... 5.06%
Mitsui Life Insurance Co., Ltd................................. 3.81%
Sumitomo Mitsui Banking Corp.............................. 3.38%
Mitsui Sumitomo Insurance Co., Ltd....................... 2.38%
Sumitomo Mitsui Trust Bank, Ltd............................ 2.20%
MSCO CUSTOMER SECURITIES........................... 2.12%
Nippon Steel & Sumitomo Metal Corp.................... 1.76%
Juniper..................................................................... 1.73%
Hitachi, Ltd.............................................................. 1.36%(as of March 31, 2013)

JSW’s Stock Prices
900

Stock prices (¥)

Tokyo stock price index (TOPIX) (Points)

700

1,000

500

500

300

0

100,000

Trading volumes (Thousands of shares)

50,0000
2012/4

46

1,500

5

6

7

8

9

10

11

12

2013/1

2

3

Network★
★ Head Office
★
★
★

★
★
★ ★

★ ★

★
★

★
★

ProfileDomestic
Head Office
Gate City Ohsaki-West Tower, 11-1, Osaki
1-chome, Shinagawa-ku, Tokyo 141-0032
Phone: +81-3-5745-2001
Facsimile: +81-3-5745-2025

In 1907, the Japanese government launched ajoint venture for the purpose of domestic weapons
production in Muroran, Hokkaido – later to become amajor steel manufacturing center – consisting of two
British firms (W.G. Armstrong and Vickers) and one
Japanese company. That was the birth of the Japan
Steel Works, Ltd. (JSW)
After World War II, the company turned its sophisticated technologies and considerable experience tomeeting peacetime needs. Continuing to produce
high-quality steel, it developed machinery making useof this steel and endeavored to open up new businessfields. In addition to heavy and chemical industries
such as electric power, steel, shipbuilding, andpetrochemicals, the company broadened into areasfrom automobiles to electrical machinery and information equipment, earning a worldwide reputation as anintegrated producer of steel materials and machinery.
Today, having grown into a comprehensive materials provider and manufacturer of mechatronics products, JSW is meeting society’s needs at the forefront.
In the steel and energy products business, we areserving the needs of the energy industry in areas suchas electrical power generation, oil refining, natural gas,
and wind power generation. In the industrial machinery
products business, we supply equipment for manufacturing and processing plastic materials, along witha diverse range of products in areas from information
technology to defense.

Osaka Office
Shinanobashi Mitsui Bldg., 11-7,
Utsubohonmachi 1-chome, Nishi-ku,
Osaka-shi, Osaka 550-0004
Phone: +81-6-6446-2480
Facsimile: +81-6-6446-2488
Fukuoka Office23-2, Sakuragaoka 1-chome, Kasuga-shi,
Fukuoka 816-0872
Phone: +81-92-582-8111
Facsimile: +81-92-582-8124

Contents
1
Financial Highlights (Consolidated)
2
Message from the President
5	Overview of and Progress Made in
the Medium-Term Management Plan
(JGP2014)
8
Our Business Domains
10
Review of Operations
13
Research and Development
14
Corporate Governance18
The Environment
20	Board of Directors, Corporate Auditorsand Executive Officers
21
Financial Section
22
Financial Performance (Consolidated)
46
Corporate Directory
47
Network

Forward looking statements
The performance forecasts included in thisreport are judgments based on the informationthat was available to the JSW Group at the time
this report was prepared and the actual results
may differ significantly from these forecasts
due to a variety of factors.

Nagoya Office
Mitsui Sumitomo Kaijo Nagoya Shirakawa
Bldg., 9-15, Sakae 2-chome, Naka-ku,
Nagoya-shi, Aichi 460-0008
Phone: +81-52-222-1271
Facsimile: +81-52-222-1275
Hiroshima Office6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602
Phone: +81-82-822-0991
Facsimile: +81-82-822-0997
Sapporo OfficeKitaichijo Mitsui Bldg., 2-9,
Nishi 5-chome, Kita-ichijo, Chuo-ku,
Sapporo-shi, Hokkaido 060-0001
Phone: +81-11-241-2271
Facsimile: +81-11-241-2275

Muroran Plant
4, Chatsumachi, Muroran-shi,
Hokkaido 051-8505
Phone: +81-143-22-0143
Facsimile: +81-143-24-3440
Hiroshima Plant
6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602
Phone: +81-82-822-3181
Facsimile: +81-82-285-2038
Yokohama Plant
2-1, Fukuura 2-chome, Kanazawa-ku,
Yokohama-shi, Kanagawa 236-0004
Phone: +81-45-781-1111
Facsimile: +81-45-787-7200

Overseas
JSW Machinery Trading (Shanghai)Co., Ltd.
28A, Strength Plaza, No.600-4,
Tianshan Road, Shanghai, 200051, China
Phone: +86-21-6192-1022
Facsimile: +86-21-6192-1023

JSW Plastics Machinery Vietnam Ltd.
Room 103, Techno-Center Thang Long
Industrial Park, Dong Anh District, Hanoi,
VietnamPhone: +84-4-3951-6383
Facsimile: +84-4-3951-6384

JSW Plastics Machinery, Inc.
555 South Promenade Ave., Unit 104
Corona, California 92879, U.S.A.
Phone: +1-951-898-0934
Facsimile: +1-951-898-1747

JSW Plastics Machinery (TAIWAN) Corp.
1F., No.21, Dahu 1st Rd., Gueishan Shiang,
Taoyuan, County 33373, Taiwan, R.O.C.
Phone: +886-3-396-2102
Facsimile: +886-3-396-2104

Detroit Office41135 Vincenti Court Novi, MI 48375,
U.S.A.
Phone: +1-248-536-0288
Facsimile: +1-248-536-5615

JSW Plastics Machinery (S) Pte. Ltd.
17 Gul Lane, Singapore 629413,
Republic of Singapore
Phone: +65-6861-4511
Facsimile: +65-6862-3166

Houston Office9801 Westheimer, Suite 220, Houston,
TX 77042, U.S.A.
Phone: +1-713-588-1303
Facsimile: +1-713-588-1322

JSW Plastics Machinery (H.K.) Co., Ltd.
Room 907, Corporation Park, 11 On Lai
St., Shatin, N. T., Hong Kong
Phone: +852-2648-0720
Facsimile: +852-2686-8204

JSW Plastics Machinery (M) SDN. BHD.
D6-5-G Block D6, Pusat Perdagangan Dana, 1
Jalan PJU 1A/46, 47301 Petaling Jaya,
Selangor Darul Ehsan, Malaysia
Phone: +60-3-7842-6076
Facsimile: +60-3-7842-6078

Japan Steel Works Europe GmbHFriedrichstr. 19, 40217 Düsseldorf,
F.R.Germany
Phone: +49-211-3116660
Facsimile: +49-211-31166640
Japan Steel Works America, Inc.
New York Office (Head Office)122 East 42nd Street, Suite 3810,
New York, NY 10168, U.S.A.
Phone: +1-212-490-2630
Facsimile: +1-212-490-2575

Japan Steel Works India Private Limited
611, Time Tower, MG Road, Sector 28,
Gurgaon, Haryana, 122001, India
Phone: +91-124-469-4444
Facsimile: +91-124-469-4433

JSW Injection Machine Maintenance(Shenzhen) Co., Ltd.
1F, YiBen Electronic & Business Industrial Park,
No.1063 Chaguang Road, Xili Town,
Nanshan District, Shenzhen City,
Guangdong Province, 518055, China
Phone: +86-755-8602-0930
Facsimile: +86-755-8602-0934

JSW Plastics Machinery (T) Co., Ltd.
78/6 JST Building 4th Floor, Moo7,
Kingkaew Road, Rachatewa, Bangplee,
Samutprakarn 10540, Thailand
Phone: +66-2-738-5272
Facsimile: +66-2-738-5277

47

Annual Report 2013

Annual Reportfor the year ended March 31, 2013

The Japan Steel Works, Ltd.

Printed in Japan 2013.11

2013